You have made an offer on a house you really want to buy; the seller has already accepted it, and you just need to sign the contract. It’s now time to put down an earnest money deposit to show the seller that you’re really serious about buying the house.
However, many things could happen between the time your deposit is in escrow and closing, and you might even lose your deposit if you’re not careful. With this in mind here’s how to safeguard your deposit.
Get every single thing in writing
A loan contingency clause enables you to get complete written approval from your mortgage lender prior to moving forward with the closing, explains a top real estate lawyer from Denver. This means that if your loan gets denied, you could get your earnest money back.
In the event that your lender doesn’t want to give you that written approval, don’t ever remove the loan contingency. Otherwise, you could forfeit your earnest money. You should likewise consider adding an appraisal contingency.
With this, you could renegotiate the property’s purchase price or legally walk away if the property’s appraised value is lower than the price in the contract.
Inspect the house very thoroughly
Even if the house is newly built and hasn’t been lived in, you need to get it professionally inspected before buying it. You need to have an inspection contingency in your contract to prevent you from unknowingly spending your money on a house that would require costly repairs.
If you find that there are some issues with the house, you could decide to go with sale regardless of the issues, or walk away with your earnest money.
Review and understand the property disclosures
Sellers are legally required to disclose any defect that they’re aware of in their property, and you must receive these disclosures after the seller accepts your offer or even prior to you making an offer, depending on state law.
Once you’ve received the disclosures, you need to take your time and understand every single thing before signing them. Otherwise, you risk losing your earnest money if you signed it and then try to back out of the deal.
Remember that thousands of your hard earned dollars are at stake because depending on the price of the house; your earnest money deposit could be a very large sum. So don’t rush the process and understand everything that could happen from submitting your offer to closing.