CodeMark TV Episode 16
So we talked about pre-approvals. We’re now into the real estate transactions. There are monies, investments that you have to make, into this portion of it. What are they?
We said the other day, there’s three of them.
- Earnest money
- Option fee
So we’re going to talk about earnest money today.
Earnest money is your good faith to the seller to show “hey, I know you’re going to take your house off the market or put option pending while I go to try to qualify for a loan,” “here’s earnest money. The earnest money goes to the title company. It doesn’t get written out to anybody but the title company. So, assuming that the transaction closes, you get that earnest money back, credited as your bottom line to your closing costs.
Now, how much is earnest money?
Earnest money is one percent. One percent of whatever the sales price you offered. Now as I said, if the loan closes, you’re earnest money is credited to your bottom dollars. If you mess up in your loan, well it’s possible you can lose your earnest money. You’ll get to a point where, let’s say it’s a bad transaction, and you’re saying “hey I want to get out,” and its maybe after your financing period. Then the timeline is up… Maybe the seller may not release the earnest money.
Here’s a catch about earnest money that people don’t understand. Even if you request to get the earnest money back, and the seller says no, it’s not that they get it either. It just stays tied up in escrow with the title company. So it ends up just being a canceled out situation.
You’re not gonna have a transaction like that because it’s going to be easy. Why? Because you’ll do a loan with us.
Next time we’ll talk about the option fee, and then we’ll go on into the inspections. Until then I’m Mark MacInerney President and CEO of Codemark Fiinancial. Catch me every Friday on Facebook Live, Lunch with Mark. And, i’m always here on Codemark TV.