BOSTON CONDO BUYERS: WHAT IS AN EARNEST MONEY DEPOSIT?
For many Boston condo buyers, purchasing a condominium can seem quite daunting. The transaction involves paperwork, moving parts, and legal and real estate jargon being thrown around that can often feel totally foreign. Throughout the Boston condo buying process, we get countless questions from clients as we guide them step-by-step and make sure that they are comfortable and understand the process. One of the more frequently asked questions we receive from clients and prospective home buyers is, “What is an earnest money deposit?”.
An earnest money deposit, also referred to as an EMD or just simply a deposit, is money that is given from the buyer to the seller, after having an offer accepted, to show the seller they have good faith in the transaction. The deposit demonstrates to the seller that you have “skin in the game” and are committed to the transaction. The deposit is then held in an escrow account until the transaction is closed, at which point the deposit is applied to the down payment.
So why is a deposit necessary?
So why is a deposit necessary? To really understand why an earnest money deposit is important, think about it from a seller’s perspective. By accepting a buyer’s offer and taking their Boston luxury condo off the market, they are no longer advertising the home and may be missing out on opportunities from other buyers.
A seller would not want to, or at least, would be much less likely, to accept an offer with no deposit because there is nothing committing that buyer to see the transaction through till the end. A buyer who is making offers with no deposit could make a bunch of offers on all different properties and just wait to see which ones get accepted and then choose from there, with no penalty or loss on their end. This would end up wasting a lot of time for those involved and would leave the seller in a position of having missed potential opportunities and needing to start from square one.
When considering the deposit in an offer, many condominium buyers are concerned about the risks involved with a deposit. A real estate purchase agreement is a legally binding contract and does carry with it some risk. However, there are contingencies in place that help to protect the buyer and minimize the risk of losing your deposit. These contingencies are standard in most contracts and a buyer has a right to them unless they choose to waive their contingencies, which is not advisable unless you are fully aware of what you are getting yourself into.
Every real estate transaction is different so to make sure that you are protected in the agreement, have your agent or an attorney review the documents. In most cases, the buyer is able to get a full refund of their deposit
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Boston condos for sale: Buyers questions and answers
- What is the difference between pre-qualified and pre-approval regarding Boston condos?
- Why do I need a pre-approval?
- How much of a yearly salary do you need to buy the average Boston condo?
- What are closing costs?
- What is a buyers agent?
- When buying a Boston condo what does the buyer pay for in closing costs?
- What does the seller pay in closing costs?
- What is a down payment on a Boston condo?
- What are hidden cost are there is buying a Boston condo?
- What do I need to do to qualify for a mortgage?
- How do I save for a down payment on a Boston condo?
- What things should I do if I’m relocating to Boston?
- How do I find a Boston condo for sale?
- How do I negotiate a Boston condo for sale?
- How can I predict changes in the Boston condo market?
- What is a probate sale?
- What is the best methods of writing an Offer for a Boston condo for sale?
- How do I find pet friendly condos for sale or rent?
- What is the process of submitting an Offer for a Boston condo for sale?
- What are the advantages of buying a Boston condo for sale with cash?
- What you should know when buying a Boston condo as an unmarried couple?
- Boston condo buyers misconceptions
- How do I get a Boston condo mortgage if I’m self-employed?
- What does the Boston condo home buying process consist of?
- What should be on my Boston condo and apartment check list?
- Tips for Boston condo buyers
- Tips on purchasing a new construction high rise condo
- How student loans can prevent your from buying a Boston condo?
- What are some examples of Boston condo real estate scams?
- Thinking of moving to Boston? Moving into a Boston condo?
- Graphic chart on all you need to know about obtaining a Boston condo mortgage
- Are we entering a Boston condo housing bubble?