An escrow is the deposit of a written instrument or something of value with a third person with instructions to deliver it to another when a stated condition is performed or a specified event occurs. The use of an escrow is most common in real estate sales transactions where the grantee deposits earnest money with the escrow agent to be delivered to the grantor upon consummation of the purchase and sale of the real estate and performance of other specified conditions.
Arizona Escrow Agreement for Sale of Real Property and Deposit of Earnest Money
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If the buyer backs out just due to a change of heart, the earnest money deposit will be transferred to the seller. Be sure to watch the expiration date on contingencies, as it can impact the return of funds.
Earnest money is always returned to the buyer if the seller terminates the deal. While the buyer and seller can negotiate the earnest money deposit, it often ranges between 1% and 2% of the home's purchase price, depending on the market.
Failing to pay a deposit on time is a fundamental breach of the Agreement of Purchase and Sale. When the buyer unilaterally decided not to abide by the terms of the Agreement by not paying the deposit, the buyer is in breach of the Agreement and that breach gives the Seller certain rights.
Earnest money is a deposit made by the home buyer to show that they are serious about the offer, says Dinnigan. If a buyer backs out of the contract without valid cause, earnest money may be forfeited to the seller as a reasonable estimate of damages.
In Arizona, the typical inspection period (or due diligence period) is 10 days. If the property you make an offer on doesn't pass inspection, or if the seller declines to do requested repairs, the buyer can cancel the contract and get their earnest money back.
In Arizona, you have 10 days from when you go under contract on a home to do your due diligence investigations. Should you discover something about the property that you simply cannot live with, you can cancel before this 10-day period expires.
For Arizona residential resale real estate, I have found that an earnest money amount equivalent to around 1% of the price you are offering for the home is usually acceptable to sellers.
In most Arizona real estate purchase contracts, the buyer will require the seller to deposit earnest money typically with the escrow company to demonstrate good faith. The deposit amount can be a percentage of the home sale price or an amount dictated by the seller.