In current market conditions, with short sales and foreclosures being the brunt of the business it is difficult to determine what is fair when it comes to an Earnest Money Deposit. An EMD is a deposit that is held with a Title Company on behalf of the Buyer until contract closing, to ensure the Buyer preforms according to the terms of the contract. Although, the money should be returned to the Buyer if particular things arise such as inspection repair items or an appraisal that is not acceptable to the Buyer or the Buyer's lender. It should also be returned if the Seller does not preform his duties.
Recently a foreclosure bank demanded the Buyer put up the full down payment of the loan in EMD to assured the Buyer had the funds to close. This is becoming a more common practice with foreclosure banks. However the draw back is, if an inspection returns large repair items or the property does not appraise, it could take the Buyer a month or more to get the EMD back because of the workload foreclosure banks are experiencing. Fortunately in this case we completed the inspection before the EMD was deposited and the home appraised for more than the contract price. If things had not worked out accordingly the Buyer could have been without a home or the EMD for some time.
Another example is a recent short sale. The contract was signed by both Buyer and Seller then the EMD was deposited with the Title Company. The Seller failed to provide the documents needed for the Short Sale Lender and skipped town. At this point the contract is in limbo and the Buyer needed to recover his EMD. The Title Company was unable to release the EMD and recommended the Buyer get an Attorney which would cost the Buyer more than the deposit being held by Title. After further research we determined that the buyer could get his EMD back by securing a judgment through small claims court. The Buyer paid the fee for small claims court, and the Seller did not show up for court. The Buyer won the judgment and recovered the EMD. What I learned from this episode was to be sure to write into the contract when it is a short sale “The Buyer will deposit the EMD upon written proof that the short sale package with all Seller required documents has been submitted to the Seller's Lender” to ensure the Seller is preforming his duties.
Bev Dudley, Realtor
850-240-3933
Recently a foreclosure bank demanded the Buyer put up the full down payment of the loan in EMD to assured the Buyer had the funds to close. This is becoming a more common practice with foreclosure banks. However the draw back is, if an inspection returns large repair items or the property does not appraise, it could take the Buyer a month or more to get the EMD back because of the workload foreclosure banks are experiencing. Fortunately in this case we completed the inspection before the EMD was deposited and the home appraised for more than the contract price. If things had not worked out accordingly the Buyer could have been without a home or the EMD for some time.
Another example is a recent short sale. The contract was signed by both Buyer and Seller then the EMD was deposited with the Title Company. The Seller failed to provide the documents needed for the Short Sale Lender and skipped town. At this point the contract is in limbo and the Buyer needed to recover his EMD. The Title Company was unable to release the EMD and recommended the Buyer get an Attorney which would cost the Buyer more than the deposit being held by Title. After further research we determined that the buyer could get his EMD back by securing a judgment through small claims court. The Buyer paid the fee for small claims court, and the Seller did not show up for court. The Buyer won the judgment and recovered the EMD. What I learned from this episode was to be sure to write into the contract when it is a short sale “The Buyer will deposit the EMD upon written proof that the short sale package with all Seller required documents has been submitted to the Seller's Lender” to ensure the Seller is preforming his duties.
Bev Dudley, Realtor
850-240-3933
RSS Feed
