What is earnest money?
Earnest money is the money a buyer puts up at the beginning of the contract. Usually about 3 to 5 days MEC (Mutual Execution of Contract the point when all parties sign the original offer). The earnest money is usually (at least in the Denver and Denver Foothills) in the neighborhood of $5,000 to as much as $25,000 depending on the price of the home. Sometimes even more. This amount has gone up in recent years due to it being a seller’s market as well as our low inventory. The sellers are not wanting to remove their home from the market unless a buyer has full intentions of fully fulfilling their contractual obligation.
Who determines how much money to hold in earnest money?
Earnest money amounts are set by the seller and listing agent. The market also bears the responsibility of setting the amount. If the market won’t put up with rising amounts then the amount must come down. The amount of earnest money is not usually a huge deal. The earnest money is considered as part of your down payment or cash due at closing. The Colorado contracts are also set up in the buyer’s favor and as long as you meet all dates and deadlines you will receive your earnest money back as long as you cancel the contract for a good reason under the deadline that coincides with your reason.
Who physically holds the earnest money?
Earnest money is held by one of three parties but is always held in the same type of account. It is either held by the listing broker’s firm, the title company or an attorney. The money is always held in a trust account. This trust account can either be intrest bearing or not. It doesn’t really matter because neither the buyer or seller is given the interest. Whoever is in charge of the earnest money is not able to release to either party until the contract is executed at the closing table or both parties sign an earnest release form.
What happens in an earnest money dispute?
The third option for the earnest to be released is after a dispute. Both buyer and seller must go to mediation to see which one can prove they are in the legal right to have the earnest money.