Earnest money isn’t complicated. Honest.
But it can be a surprise if you’ve never bought a house. That’s when I learned about it, the first and only time I made a purchase. It’s money a buyer puts up as a security deposit, to show good faith and seriousness about a purchase.
Not long afterward, a good friend was buying his first house and had to dig around in his seat cushions to find earnest money — because he didn’t know about it either and he was just about tapped out. Neither of us had taken a homebuyer education class.
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It seems like in my case it was a couple of thousand dollars, but who knows?
That was nearly 22 years ago, and like taking the driver’s test 41 years ago, registering with the Selective Service 39 years ago and getting a marriage license 24 years ago, it hasn’t come up since.
But I haven’t bought a house since 1999, or let my driver’s license expire since 1980, or been drafted since registering in 1982 or gotten married since 1997. Out of sight, out of mind, as they say.
But earnest money came up the other day on Facebook, along with some confusion surrounding it — and Kathy Fowler, a Realtor and state managing broker for eXP Realty, cleared it up.
It’s a kind of inside baseball, but with so many people in the home-buying game in this silly season, earnest money has probably surprised some people, especially any first-time buyers who already find themselves paying above asking price.
I need more money? Now?
Fowler posted the following in a Facebook group for real estate agents and others in the business. I remember wondering about some of this myself.
“Earnest money does not constitute a contract, it is simply an instrument of the contract. If the buyer’s earnest money does not get deposited, then that does not mean you do not have a contract. It means one of the parties has not fulfilled their end of the contract. The seller decides if lack of delivery of earnest money cancels the contract and not lack of delivery of earnest money from the buyer.”
Here it is, chapter and verse (actually, paragraph 16), from the Oklahoma Real Estate Commission-approved Oklahoma Uniform Contract of Sale of Real Estate-Residential Sale.
“UPON BREACH BY BUYER. If at any time prior to closing the Buyer’s Earnest Money should fail for lack of delivery or lack of collection pursuant to Paragraph 2, then Seller may, at Seller’s option, elect to do one of the following: (i) cancel and terminate this Contract upon delivery of notice of termination to Buyer, (ii) pursue any other remedy available at law or in equity, or (iii) enter into a written agreement between Buyer and Seller modifying the terms of Paragraph 2 to cure the lack of delivery or lack of collection of the Earnest Money. If, after the Seller has performed Seller’s obligation under this Contract, and Buyer fails to provide funding, or fails to perform any other obligations of the Buyer under this…