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.
Minnesota Escrow Agreement for Sale of Real Property and Deposit of Earnest Money
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Earnest money refers to the deposit paid by a buyer to a seller, reflecting the good faith of a buyer in purchasing a home. The money buys more time to the buyer before closing the deal to arrange for funding and perform the hunt for names, property valuation, and inspections.
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 isn't always a requirement, but it could be a necessity if you're shopping in a competitive real estate market. Sellers tend to favor these good faith deposits because they want to ensure that the sale won't fall through. Earnest money can act as added insurance for both parties in the transaction.
When property of any kind is placed in trust with a real estate broker, all property to be escrowed must be immediately deposited, upon receipt, by the real estate licensee.
Upon any default in the terms of a Minnesota real property purchase agreements, or any unfulfilled condition in such purchase agreement, which may allow for a statutory cancellation of the purchase agreement, or other negotiated settlement.
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.
Generally, Earnest Money is either a dollar figure, like $1,000.00, or some percentage of the total purchase price. Depending on whatever agreement the parties may reach the amount of the Earnest Money could be as low as a couple hundred dollars or as high as 40% of the purchase price.
A buyer will submit a purchase agreement. With it, the buyer should include some earnest moneypart of the down paymentwhich is refundable if you reject the offer.
Minnesota Earnest Money although common is not a requirement for any real estate transaction, because the promises that the buyer and the seller make to each other in the purchase agreement constitute adequate legal consideration for the transaction.