Secure Your House Buying Process by Earnest Money Agreement House buying process begins after youâ€™ve finally decided to pursue and buy property. However, the path to owning a house is not easy. There are many negotiations, talks, legal works, technical analysis, preparation of financial requirements, and more documentary requirements and compliances that must be done prior to finally buying and transferring the property to your name. House buying process involves the search for property; making the offer to purchase; getting a mortgage (if buying through installment payment scheme); closing the deal by finalizing the contract of sale; and lastly, moving in to the house and you can finally claim that you own the house.
Buying a house, being a capital intensive investment, needs careful consideration before finally letting go of your hard-earned cash. Financial needs during this time of economic distress should be rationally decided and all factors should be given full consideration. To make the real estate deal more secured, an earnest money agreement may be required upon signing of the contract indicating the intent to purchase the house or property. There is no exact formula on how much earnest money to deposit into the escrow account, as long as the amount has been mutually agreed upon by the parties to the transaction. The usual amount ranges from $500 to $5,000 which shows sincerity to buy the house.
Earnest money agreement covers the amount agreed and will serve as security for the deal being transacted at. For example, when you are buying a house, you need to put certain amount to give security that the transaction will push through because house buying process consumes time and effort as well. The amount may be considered as a portion of the down payment, or can be refunded should the transaction fails to be completed. Whether the earnest money is refundable or creditable as part of the amortization will depend on the terms and conditions stipulated on the contract drawn by the parties to the buy and sell transaction.
Because house buying process may involve legal assistance and financial valuation of the property, the process may consult professional services of a lawyer or analyst who would certify to the validity of the transaction. These legal and financial interventions are called third party fees and may be deducted from the earnest money. In some cases, earnest money is used to settle some dispute between the seller and buyer because of a failed transaction. But originally, the concept is to make sure that transaction be successful and favorable both to the buyer and seller of the property.