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When might earnest money not be refundable?

On Behalf of | Jun 12, 2020 | Residential Real Estate

Ready to buy a home in Delaware? Those who are need to be prepared to put down earnest money to get the house taken off the market in order for it to be appraised and inspected before the sale goes through. Just be careful when agreeing to pay earnest money, as it may not be refundable if one decides not to buy the property.

Earnest money is, in short, a deposit on a home. It is good faith money used to show a seller that one is serious about purchasing the property. Ultimately, it will be put toward the buyer’s down payment and/or closing costs.

There is no set amount for how much an earnest money deposit should be. Sometimes it is based on a percentage of the value of the home — anywhere from one to 10%, and sometimes it is a fixed amount. The amount of an EMD may be negotiable.

An EMD is refundable for a number of reasons. Two of the most common reasons being that the appraisal falls short or there are problems with the home. An EMD is not refundable if one decides to back out of the deal for unlisted contingencies, has a change of heart or fails to meet any deadlines listed in the purchase agreement.

The amount of earnest money one might have to put down can be a significant sum. There are several things home buyers in Delaware can do to protect their EMDs. They can make sure certain contingencies are included in the purchase contract, make sure they fully understand the terms of the agreement and ensure the money is appropriately handled by a reliable third-party. Before buyers turn over their earnest money, they may want to seek help in reviewing or negotiating contract terms. An experienced residential real estate attorney can assist with this.