Escrow and Earnest Money Checks in Business
Escrow and Earnest Money –
Earnest money checks are an important component of the real estate transaction process. Earnest money is a sum of money given to a real estate brokerage as evidence that the buyer intends to complete the transaction.
This money is typically held in an escrow account until closing and can be paid via personal check, wire transfer, certified check, or other methods acceptable to the law firm or title company handling the transaction. Due to concerns about fraud and identity theft, the party providing title may require funds to be paid with a bank account or cashier’s checks.
The party providing title deposits the earnest money into an escrow account and holds it in good faith, and this is negotiable between the buyer and seller. Typically, earnest money is a percentage of the total purchase price. The earnest money deposit serves as a good faith offer to purchase the property and is applied to the buyer’s closing costs.
What Happens if The Buyer Defaults?
If the buyer defaults on payment or fails to close, the seller may retain all or a portion of the deposit as liquidated damages. Therefore, earnest money checks are an essential component of any real estate transaction, as they demonstrate buyers’ commitment to a particular property purchase.
Earnest money is sometimes used as a bargaining chip to negotiate better terms for the transaction. If a transaction fails, these funds are typically returned to the buyers. The amount of earnest money varies based on local regulations and real estate contracts, but is typically between 1% and 3% of the purchase price.
If you’re looking for a professional escrow company with experience in managing earnest money deposits for real estate or business transactions, then contact Secured Trust Escrow now. We have over 22 years in the escrow industry and we service the entire state of California.