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Video instructions and help with filling out and completing real estate earnest money contract pdf

Instructions and Help about real estate earnest money contract pdf

Hi there Emily Farber with Lepik Cregar Realtors and Iowa City Iowa thanks for joining me today's video covers the topic of what happens if you change your mind buyers you enter a contract all is going grand until suddenly it's not you've had a change of heart you've got cold feet your circumstances have changed whatever the reason you no longer wish to buy the home that you have set forth what do you do now what might happen what could be the potential outcomes of such a decision stay tuned all right let me start this off by saying I am NOT an attorney I don't play one on TV I don't have a night job as an attorney so if you have legal questions I highly highly recommend that you consult a real estate attorney when you find a property that you're interested in and you write a purchase agreement on it you enter a legal and binding contract once the terms of that agreement have been met if it's got a buyer signature a seller signature and there has been consideration ak8 earnest money presented and accepted you are in a legal and binding contract now if you change your mind right away before the seller has even signed there still is time to back out have your agent write a written withdrawal with a time stamp on it and have that presented to the sellers agent no harm no foul you've stopped everything before it even gets moving forward but if you are already into an accepted purchase agreement things are a little bit stickier if you change your mind part of your purchase agreement should include several different contingencies which are there to protect you as the buyer and prpotential exits out of the contract if you may need them some examples of common contingencies are inspections if something comes up upon your inspection that you can't live with that you're very concerned about and that you and the seller cannot come to terms with on how that is going to be dealt with that provides you with an exit out of the contract where you can legally leave the contract and have the earnest money returned to you some other common contingencies and purchase agreements are financing if your financing falls through that provides another exit for you to leave the contract and keep your earnest money as you work your way through your contingencies and do your due diligence of investigations eventually you have to release those contingencies in writing once a contingency is released it's like that exit door is shut that is no longer an option for you eventually you will reach a point in the contract where all of those exit doors are shut and you're just waiting for closing so what happens if something changes you freak out and you get cold feet your circumstance has changed maybe you got a job promotion and you're leaving

FAQ

Is a real estate contract valid if it calls for zero consideration (no earnest money) from the buyer?
[Disclaimer: I’m not a lawyer, so this isn’t legal advice.]The question is mixing two issues together.All contracts must have consideration—something of value offered (in this case) by the buyer. That consideration—that “something of value”—usually is money, but it doesn’t have to be. Transfers among family members often are accomplished with “love and affection” being the consideration. Outside of that, something else of value (a ring, a motorcycle, a computer) will work. But it doesn’t even need to be tangible, just something of value. For example, I did a lease-option with no money out of pocket. But the value I offered was a written promise to pay the rent every month for up to 3 years.The earnest money deposit can be quite different. This is money offered by the buyer to show his/her seriousness. The amount, and how it’s calculated, often varies geographically. In some places, it may be a set amount, such as $1,000 or $5,000. In other places, it’s often a percent of the offer—such as 1% of the offer. It’s usually not a huge amount, but it’s enough to show that the buyer is serious.Sometimes a single payment can serve both needs. Real estate investors—wholesalers in particular—do this a lot. They may offer the seller a $100 earnest money deposit. Or less, as in $10 . . . though many lawyers aren’t comfortable with such a small token amount. Incidentally, most investors encounter no resistance to such a small amount. Usually, the seller is highly motivated, and just wants to get rid of the property for whatever he/she can.
Have you ever represented a buyer that was sued for their earnest money when breaching a real estate contract?
Yes.It was quite a situation! The Silicon Valley market is quite competitive for buyers because there are fewer homes available than needed. My client finally found the perfect house. We swooped in with a good offer, which the seller accepted. Everything was proceeding to plan until it was time for the buyer to sign the papers.Mrs. Buyer suddenly went on a trip overseas. These days, that might cause a delay of only a day or two as the papers are emailed, signed, and overnighted back. However, this was a few years ago.The papers had to overnighted to Mrs. Buyer and, in this international situation, “overnight” took two business days. Once she received the papers, she found out that the American embassy or consulate nearest her would only notarize signatures on certain days and the next date would be several days from then. So, to save time, the next day she flew to a neighboring country which had an American embassy open every day. She had the papers notarized and “overnighted” (again, two days) back to the U.S.Delays in closing of a day or two are common. In this case, closing was delayed more than a week. Though frustrating and unfortunate, even that amount of delay would ordinarily not cause a lawsuit.In this case, however, our transaction was the first of FOUR legs. Our seller needed the funds in order to complete the purchase of his new home, and the seller of that property needed the funds to close on his purchase, and there was one more after that. As the delay increased, each seller was pressuring their buyer to “perform or else!”As the delay continued, our seller felt the market was so good that he could get even more for his property by putting it back on the market. So, he demanded my client cancel or lose his deposit. Soon, the lawyers were involved and the brawl was on!We went to mediation and that was quite a scene, too. The mediator, a 6′ 2″ retired judge and police officer, was pressuring my client to give in. My client’s attorney was useless so I whispered some advice to my client, which he believed in and followed.As we executed on that, the mediator began pressuring me (not a party to the transaction) to contribute money to settling. I’m just 5′ 10″ but I stood toe-to-toe with him and told him exactly what we would, and would not do. For sure, I was not about to pay for someone else’s house.Ultimately, the mediator backed down, we settled on the exact terms that I predicted to my client, and my client got the house!(I’ve also been in one other lawsuit — the seller breached. They accepted an offer and then changed their mind about selling. I won that one, too.)
Could I leave out the earnest money deposit clause in a real estate standard purchase agreement?
Well technically, you could, but as a seller's agent I would advise any client of mine against giving your offer serious consideration. Earnest money has a function. It serves to show the seller just how serious you are about making the purchase. Which means, the more Earnest you offer, the more serious a seller should consider you. In addition, it is one of the negotiable terms in any offer, so if you do go to the trouble of cutting t out, you're only likely to see it re-inserted by the seller in the negotiating process. Do you have an objection to earnest money? It comes back and credits your side at the closing table. Or is your objection that you feel you may wish to rescind your offer at some point? That is tantamount to playing games with a seller...
How often do sellers sue for earnest money when the buyer backs out of the contract?
How often do sellers sue for earnest money when buyer backs out of the contract?Almost never.It shouldn’t be necessary.If an agent is involved (and often even if one isn’t), the earnest money deposit goes into an escrow account. If an agent is involved, it’s an escrow account of one of the brokerages—typically the one representing the seller. Even when an agent isn’t involved, often the money is deposited into an escrow account—often one managed by the title company.It takes the agreement of both the buyer and seller to release the money. But that usually happens. Only if the buyer and seller were unable to agree might the seller need to sue. If the buyer doesn’t agree, the money just sits in the account.Check the sales agreement to see how it addresses the EMD. And check with your agent to find out the practices in your state.
Does earnest money in a real estate transaction have any real significance to the seller in an offer with an inspection contingency, since the buyer can back out of the deal and easily reclaim the earnest money no questions asked?
Yes. It protects the seller to a large degree if the buyer drops out for a reason not specified in the contract. I had two buyers - brothers - who ran a head shop in the late 70’s. They were making money hand over fist. In their early 20’s they decided to buy a house to live in but also as a tax deduction and investment. The sellers accepted their offer and the buyers were approved for the loan. The house passed inspection easily - no problems. Then the local county government passed a law that banned head shops totally. In effect it put them out of business. They wanted to drop the sale - they had no job. Well, they had already been approved for an FHA loan. We informed the FHA, thinking they would withdraw the approval - they did not. When FHA approves you by God, you stay approved. They asked the seller to release them. The seller would not they had bought a new house, believing their was sold. Long story short the 5K deposit could have been forfeited. We found a way to keep the deal together and it finally settled, but if not for the deposit, the deal would have died and the sellers hurt badly.
Does the seller or buyers real estate representative typically hold the earnest money attached to an offer?
That will depend on the laws and customs of your jurisdiction, along with the contract you’ve negotiated with each other.In Massachusetts it is customary for the listing broker to hold those funds in escrow, but I have seen the seller’s attorney, the buyer’s attorney, the buyer’s broker also hold them, though that is much more rare.
How do people in real estate make money selling contracts?
There’s some great YouTube content from Max Maxwell and Phil Pustejovsky that covers a lot of the basics of real estate wholesaling.I personally went through their content and then decided to learn from and join a team in my city that has done it for years.If you can’t do that, find a mentor and offer to work for free at first to get your foot in the door.Doing that, I’ve fast tracked my learning curve. I’ve done and closed 7 deals in 8 months (all my own generated leads), with gross profit of $75,000.My latest deal had a $32K assignment fee (my personal best so far).Basically, you are a marketer and a deal finder. You find motivated sellers or distressed properties and get them under contract at a certain price.For example, my latest lead was a lady 3 months behind on the mortgage needing out. She wanted $88K. I ran numbers and knew that I could get her that and still make a solid profit.I did a showing at the property 3 days later, had 10 investors in my network came to see it. I was asking $120K and found 3 investors at asking price. And that is how it is done.The end investor closes on the house and you make the difference. Make sure to work with an investor friendly title company. Ask around in local RE Facebook groups and forums and you’ll find a few that are recommended. Good luck!
Is it possible to structure a real estate contract for a contingent sale so that if the buyer does not sell their other home in an agreed upon time frame, the seller can keep the earnest money the buyer had put down?
Yes. This is not an uncommon arrangement between sellers and buyers.  A contract is drawn for a sale contingent upon the buyer selling their home by a certain date.  The contingency clause will set forth the time frame for the buyer and other conditions (if any), and provides for the forfeiture of the deposit in the event the buyer is unable to close by the specified date (i.e., they could not sell their home).  The seller's attorney (or in some cases the seller's broker) holds the buyer's deposit in an escrow account, acting as an "Escrow Agent," who must then transfer the deposit money as expressly provided in accordance with the terms of the contract.  However, whether the buyer is able to sell their home (or anything else) by a certain date is really irrelevant, so the contract should be a simple, common contingency contract in which the deposit is forfeit if the buyer is unable to close by the agreed date for any reason.
Why do real estate buyers traditionally put up earnest money as part of their offer, but sellers typically do not put up earnest money in the event they fail to execute on their commitments?
Sellers put their property at risk - they have the most to lose if a transaction goes bad. That is pretty earnest. A bad buyer can tie up a seller for months, costing him money. If a seller damages a buyer by fraud there are legal remedies a buyer can pursue. It is to avoid situations where people are at risk - buyers or sellers - that realtors work hard to prevent. THIS is why you hire an agent.
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