6 Times You Really Can Get Your Earnest Money Back

In real estate, the importance of being earnest is measured not by a handshake and a “Sure, we’ll buy your house,” but cold hard cash—aka earnest money. That’s the deposit that you, dear home buyer, put down once you agree to purchase a place (typically 1% of the home’s price) and that you stand to lose if you back out of the deal for no good reason.

While this safeguard serves to keep fickle buyers from changing their minds unnecessarily, there are plenty of times when you can—and should—bail with your earnest money firmly in hand.

Here are six good reasons to walk away that won’t force you to forfeit this chunk of money.

1. The house was appraised for less than expected

One surefire way to get your earnest money back is to have an appraisal contingency. Your lender will want to have the property appraised to see if it’s really worth what you agreed to pay for it. If the estimate is lower, the lender will loan only up to the lower amount—which means it’s up to you to cover the difference. But with an appraisal contingency, “the buyer only has to buy the home at the appraised value,” says Joshua Jarvis, a Realtor® in Atlanta.

An appraisal contingency gives you leverage to ask the seller to lower the price or to sweeten the deal by, say, paying your closing costs. But if no agreement is reached, then you can take your earnest deposit and skedaddle.

2. Your financing fell through

If you can’t find a lender who will loan you money within a certain amount of time, a financing contingency allows you to get your money back. Normally you have to be flat-out denied financing by the lender in order to get a refund; in other words, you can’t bail scot-free because you didn’t like the interest rates offered.

A typical time frame to find financing is “often two weeks from date of the approved contract,” says Doris Phillips, a Realtor and broker with Lake Homes Realty in Pelham, AL.

3. Your other house didn’t sell

It’s hard to buy a home if all your money’s tied up in your old one—which is why many buyers in this all-too-common scenario have a sale contingency in their contract: They will buy the new place only if they can unload their old digs within a specific amount of time. How much time that is depends on how quickly homes move in your market, so consult your Realtor for more specifics. But the nice thing is, as long as you’ve got this contingency in place, if your old home doesn’t sell, you can back out of your new purchase without losing anything but time.

4. You find out the home has a major flaw

Most sales are contingent on a home inspection—that’s where an inspector checks out the house, soup to nuts, and identifies any problems. While many flaws can be fixed and the deal can go through, there are some doozies that should give you major pause. They include a history of problems with mold, foundation, electrical, pollution, and flooding. If your home inspection unearths these problems, you can either negotiate to pay a lower price (since you’ll have to pay for repairs) or abort the mission and take your earnest money with you.

Also keep in mind that sellers are legally required to reveal certain flaws (which vary by state) in a disclosure document. So if you find out a seller has tried to cover something up—and that something is big—it is typically well within your rights to take your earnest money and run.

5. The house isn’t finished

Sounds weird, right? But it’s something you should keep an eye out for if you’re buying a new build.

“Builders are notorious for not delivering a finished product, and the buyer has every right not to close for what they are paying for,” Jarvis says. “I had one where the builder wanted the buyer to close even with an unsafe deck.” In that instance, the buyer would have been able to back out and get the earnest money back, but eventually the construction company fixed the problem (after firing the deck builder).

6. The seller backs out

This may be a no-brainer but just in case you’re wondering: You’re entitled to your earnest money “if the seller backs out for whatever reason,” says Lynn Windle, a Realtor in Plano, TX. Perhaps the most common scenario for this is when you’ve got a sale contingency, but while you’re waiting to sell your home the sellers decide to take another offer. But sellers can bail for all kinds of reasons, and whatever they are, rest assured, your earnest money is all yours.

Keep in mind, though, that it all depends on your contract: If it says your earnest money is nonrefundable, then you’re probably not getting it back without a lawsuit.  If it is refundable, you’ll then need to get a release of contract and disbursement of earnest money form signed by all parties—here’s an example of one.

Source: Realtor.com, Craig Donofrio
http://www.realtor.com/advice/buy/reasons-to-get-your-earnest-money-back/

5 Biggest Home-Buying Fears (and How to Face Them)

Buyers’ biggest real estate fears sometimes hold them back from buying — not just around Halloween, but throughout the year. The scary thing is, these fears are sometimes well-founded.

Here are some of the issues that commonly keep home buyers awake at night, and what you can do about them.

“The house has a cracked foundation, dry rot, or a leaky roof”

Renovating, fixing and repairing are on few buyers’ wish lists. When faced with the home of their dreams, they fear the inspection. What if there is dry rot, or a roof or foundation issue?

Most homes will need routine maintenance, and a good inspector will point this out. But it’s important not to let your fears get the best of you. Much of what the inspector comes up with during the inspection is for informational purposes only. Every problem does not need to be repaired right away.

The inspector’s job is to point out every issue he sees in the house. Ask him to explain how bad the issue is, and how long it can go before needing replacement or repair.

If an issue arises that needs immediate attention, go back to the seller and see if they will repair or credit you back to repair after you close.

“I’ll lose my deposit”

Buyers typically put in an earnest money deposit with a signed contract. Typically, this is 3 percent of the purchase price. The seller does not cash the check. Instead, the money sits in an escrow account and can’t be released without both parties’ signatures.

It’s nearly impossible for a buyer to lose their deposit. If you have an inspection, disclosure review or loan contingencies, work closely with your real estate agent to mark those timeframes.

If you need to remove these contingencies in writing, plan to firm things up a day in advance. If you are in negotiations around a contingency date, be sure to extend the contingency date to keep yourself under contract.

“I’ll lose the house”

If you find the home of your dreams, you may have to move fast. Particularly in competitive markets, many homes sell before the first open house to quick acting and super-motivated buyers.

If you see a new listing hit the market, be sure to let your agent know right away. Try to make an appointment to see the home as soon as possible.

Also, find out immediately how the seller’s agent plans to handle any offers received. Sometimes they will take the first offer, especially if it’s a good one. More often than not, the seller and the agent will have an offer date to review offers or ask for best and final offers by a certain day.

If you are travelling or busy with work, be sure not to miss out on your dream home. Be in constant contact with your agent, and flag potential homes that look like a great fit.

“My agent doesn’t have my best interest in mind”

Great agents are always on the prowl for new properties, checking out the market and protecting your best interest at all times.

Some buyers fear that their agent might have different motivations, or that they aren’t on the same page. If you have doubts, change agents. Never settle or take any random agent that comes along as your buyer’s agent.

You and your agent should be committed to each other. Sit down before you begin the process and speak to your agent, much like a job interview. And if you have any doubts about your agent’s abilities or motivations, find another agent.

“We’ll never find a house in time for…”

A real estate purchase should never be rushed. If you have a firm deadline creeping up, make a plan B.

For example, many buyers face an expiring lease or a school application deadline. If you are three months out from a deadline and you haven’t found a house, take the pressure off by putting an alternate plan in place.

Home buying is an expensive and complicated transaction. You don’t want to rush into a purchase and make a mistake. It’s much easier and safer to get another rental or find a temporary address or try some out-of-the-box idea. It may be a little inconvenient, but you can handle it.

If something scares you about a home, the buying process, or a third-party involved in the sale, voice your concerns. Listen to your voice of reason, and stick with your gut.

Many home buyers’ initial fears will fall by the wayside as the buyer gets into the market. Take it slow, and don’t be afraid to take a step back to allow time and space to think things through. It’s better to take your time than to let buying your dream home become a nightmare.

Source: Zillow Blog, Brendon Desimone
http://www.zillow.com/blog/biggest-home-buying-fears-184728/