Texas Escrow Agreement for Sale of Real Property with regard to Deposit of Earnest Money
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How to fill out Escrow Agreement For Sale Of Real Property With Regard To Deposit Of Earnest Money?
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FAQ
There are several ways to get your buyer's earnest money deposit back in Texas, including mediation, suing for the money, and including a liquidated damages clause.
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.
Without proper payment, the buyer does not have the unrestricted right to cancel. If Buyer gives notice of termination within the time prescribed, the Option Fee will not be refunded; however, any earnest money will be refunded to Buyer.
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.
The earnest money is not consideration for the contract. However, if a buyer doesn't deposit the earnest money with the escrow agent within a reasonable time after contract execution, the buyer would be in default, and the seller could exercise her rights under a default provision.
When the transaction is complete, the Earnest Money is credited toward the buyer's down payment. In most situations, if the seller terminates the transaction the Earnest Money is returned to the buyer. However, if it is the buyer who terminates the transaction, the Earnest Money is generally awarded to the seller.
Buyers are given an earnest money deposit deadline of three days (unless the deadline falls on a weekend or holiday, in which case the deadline is the following business day).
Formation of a valid contract for the purchase and sale of real estate in Texas does NOT require a Buyer to deposit earnest money. Even if a contract expressly requires the Buyer to make the earnest money deposit within a certain time, failure to do so does NOT mean that no contract has been formed.
Typically, the deposit would remain with the deposit holder (realtor or solicitor) pending a court order or mutual release signed by both parties.