Welcome to our Important Date Blog Series! This series of blog posts highlights each common important date in the Purchase & Sale Agreement for the State of Maine. These were written to give you a basic understanding and we suggest that you always speak with your Agent if you have any questions!
We’ll start with the Earnest Money Deposit. This is one of the first deadlines in the contract. Providing a check as soon as you’re able sets the tone for the whole transaction.
Yes. Money, already.
When starting your home buying process you’ll most likely meet with a lender who will be funding the purchase of your new home. They’ll ask you to send them your paystubs (yes, even from two years ago) and a bunch of other important documents they need in order to tell you how much money they’re willing to loan you for your home. They’ll most likely tell you formally, in the form of a pre-approval letter or pre-qualification letter. That letter will show how much “house” you can afford. In some cases, they’ll also break down what the average cash to close amount will be based on your targeted house price, loan program, etc. This is an amount you’ll need to bring to the closing table in the form of a bank or cashier’s check. So, hopefully, you have that saved up somewhere.
Now, when you go under contract on a home, in most cases you’ll be expected to provide a small amount of your cash to close, aka your down payment or earnest money deposit. This money will be held in a trust account with either the Listing Agency or Buyer Agency. By putting this money down it shows the Seller that, A. You have cold hard cash, B. You’re serious about wanting this property, and C. You have the rest of the down payment. Basically, you’re a real person with a real bank account and grown-up money. Here’s a check to prove it.
However, the Purchase and Sale has several contingencies and deadlines that need to be met by either party. So, if the sale doesn’t work out, and either party defaults in the contract, you sometimes get the money back, or sometimes the Seller gets the money, or sometimes the agency gets some of the money. Lots of different scenarios that your agent can outline for you. Buyers need to prove they have some money, Sellers like to see that Buyers have some money, and Agencies hold that money safely until they’re authorized to release it. Yes. Money, already.