Three Mistakes That Could Cost You Your Earnest Money
If you have found your dream home, you want to do everything possible to secure it and make sure that at the end of the day, it is yours. Part of “everything possible” is agreeing to and handing over the sizeable cash deposit—otherwise known as “earnest money.” Typically, that money is applied to your closing costs and down payment, but if you are not careful, you may see that money go up in smoke. If you are in the market for a new home, you must be careful in what you do and do not do, as your actions could cost you your earnest money. Here are three mistakes to avoid to ensure that your money—and your home—are yours at the end of the day.
Not Acting in Time
One of the biggest mistakes that our real estate attorneys see potential homeowners make during the homebuying process is failing to perform certain responsibilities on time. Some responsibilities that homebuyers must follow through with include getting the home inspected or finalizing the terms of their mortgage loan.
If the timelines for certain obligations pass and the homebuyer still has not met the seller’s requirements, the seller has one of two options. One option involves the seller giving the homebuyer extra time to fulfill his or her end of the bargain. Sellers typically only do this when the buyer has a valid reason for failing to meet the deadlines in the first place. However, if the buyer does not have a credible reason for why he or she did not get everything done in time, the seller has every right to cancel the deal altogether. If he or she chooses to do this, the dealer has effectively breached the contract and therefore, is not entitled to his or her deposit money.
As a buyer, it is up to you to meet the seller’s requirements within an allotted period of time. If you fail to do so, you may unwittingly forfeit both your dream home and your money.
Waiving Certain Contingencies
Though it is never a good idea to waive contingencies of a real estate contract, because Alabama is a buyer-beware state, our attorneys at Cloud Willis & Ellis strongly recommend against doing so in this state. It is true that many contingencies are in place to protect sellers, but some, such as one that allows buyers to walk away if a home does not pass inspection, actually work in favor of the buyer.
You may feel tempted to waive certain contingencies in order to appear more favorable in the seller’s eyes, but in the end, your decision to do so could cost you in the long run. If you decide not to buy the property because of costly structural issues, you may be forced to sacrifice your contingency—which may be your deposit money for your true dream home.
Once you sign the papers and begin the escrow process, you are obligated to go through with the purchase—and if you do not, the seller has every right to take your contingency money and even sue you for additional damages.
While you could always hope that the homeowner has mercy on you, we would not count on it. If you want to save yourself time, headache, and money, do not commit to buying a home that you are unsure about. Get the inspections performed within the allotted time frame, make sure to secure a loan before shopping for a home, and discuss the purchase with your partner before you pull the trigger.
If you are in the market for a new home, be smart about the way in which you shop for your dream home. Make the most of your time and money and work with a real estate lawyer to avoid the most common buyer mistakes. Call Cloud Willis & Ellis today to learn more.