3 Things You Must Know About Your Earnest Money When You Buy A West Knoxville Home
When you write an offer on a West Knoxville home, you’ll be required to put down earnest money as a sign of good faith. Earnest money is what you stand to lose should you choose to walk away for any reason than what is outlined in the contract.
When you write an offer, it’s important that you understand how the earnest money will be handled should something go wrong in the transaction. In this post, we’ll outline 3 things you must know about your earnest money when you buy a West Knoxville home.
The Purpose Of Earnest Money
First and foremost, you must understand the purpose of earnest money when you buy a West Knoxville home. Without a clear understanding of the purpose of earnest money, you may make a critical mistake that causes you to lose it.
Earnest money is what you put down when you make an offer on a West Knoxville home. Generally, it’s somewhere between $500 and $1,000, but it can sometimes be a bit more, depending on the price of the home.
When you make an offer, you want to show a seller what you’re willing to lose should you decide to walk away from the transaction for any reason other than what’s outlined in the contract. It’s what protects both the buyer and seller should one of them not decide to hold up their end of the contract.
If you want an easy way to increase seller confidence, increase your earnest money.
When Do You Get Your $ Back?
When you use a realtor to buy a West Knoxville home, they can help you write a contract that protects your best interest. The standard Tennessee contract that realtors use contains a few general contingencies that help protect a buyer and allow them to get their earnest money back should certain situations arise. As a buyer, you have the right to waive these contingencies, but you should think long and hard before doing so.
Here are 4 situations where you can get your earnest money back.
Home Inspection Contingency
Until a home inspection is completed, there is no telling what kind of issues a home can have including rampant mold issues, a leaky roof or a faulty foundation. And, there are certain times where a home has more issues than what you may want to take on.
Most contracts include an inspection contingency clause that protects you if there are inspection issues. If you’re unable to negotiate repairs with a seller or if the home inspection is altogether too scary, you’ll be able to walk away with the transaction and still keep your earnest money.
When a home doesn’t appraise, if you’re unable to come up with a solution with the seller, you are able to get your earnest money back. That is if you contract includes an appraisal contingency.
A lender will want to make sure an appraisal is performed on a property. They do this to ensure that they’re not lending out any more money than they have to. When a home doesn’t appraise, you’ll need to work out a solution with the seller. If you cannot, you can walk away with your earnest money.
Even when you get pre-approved with no problem, problems can arise along the way that could prevent from getting final loan approval. If something changes with your finances, it can be scary to think you may have to forfeit your earnest money. The good news, though, is you probably won’t.
Most contracts include a financing contingency clause. If you get laid off from your job or if something changes with your credit, a finance contingency clause protects you when you no longer can be approved for a loan.
Home Sale Contingency
Finally, you’ll also be able to get your earnest money back if the sale of your home falls through. Oftentimes, buyers need to sell a home before they’re able to buy, so there’s often a contingency that protects you if a sale of your home falls through.
What Deadlines Must You Meet?
As the buyer, there are certain contingencies that are part of the contract to protect your best interest. Still, you’re required to hold up your end of the contract as well to keep the process moving. If you drag your feet and don’t meet certain deadlines, you risk losing your earnest money.
Here are a few of the deadlines that you’ll be required to meet as part of the real estate contract:
- Home inspection. You’ll have a certain amount of time to do you home inspection and negotiate any repairs with the seller.
- Financing. You’ll have a certain amount of time to start your loan application (typically 5 days) after the offer is accepted.
- Appraisal. Your lender will have a certain amount of time to complete the appraisal to ensure that the loan process moves forward.
As a buyer, it’s important that you know what parts of the contract you’re responsible for taking care of. Failure to do so may result in your loss of earnest money.
Are you interested in buying a West Knoxville home for sale? If so, please do not hesitate to let us know. Rick can be contacted at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com. Kati can be contacted at 865-696-1888 or via email at Kati@KnoxvilleHomeTeam.Com. Also, be sure to check out our West Knoxville Home Search Page to see what homes are for sale in the area.