Earnest Money Disbursement Agreement

Earnest Money Disbursement Agreement: What You Need to Know

An earnest money disbursement agreement is a legal contract that outlines how the earnest money deposit will be distributed in the event that a real estate transaction falls through. This agreement is typically signed by both the buyer and seller and specifies the reasons for cancellation, the terms for disbursement, and any fees that will be deducted.

Earnest money is a good faith deposit made by a buyer to show the seller that they are serious about purchasing the property. This money is typically held in an escrow account until the closing of the sale. However, if the sale falls through for any reason, the earnest money deposit must be disbursed according to the terms of the agreement.

In most cases, the earnest money deposit is first applied to any fees or expenses incurred during the sale process, including inspections, appraisals, and title fees. If there is any money remaining, it will then be distributed to the buyer or seller depending on the terms specified in the agreement.

The terms of the earnest money disbursement agreement can vary depending on the state and local laws, as well as the preferences of the parties involved. Some agreements may require the seller to retain a portion of the earnest money deposit if the buyer cancels the sale for certain reasons, such as financing issues or failure to obtain homeowner`s insurance. Other agreements may provide for a full refund of the earnest money deposit to the buyer if the seller fails to deliver clear title to the property.

It`s important to understand the terms of the earnest money disbursement agreement before signing it, as this can have significant financial consequences for both the buyer and seller. If you`re unsure about any of the terms or conditions, it`s best to consult with a real estate attorney or agent who can guide you through the process.

In conclusion, an earnest money disbursement agreement is a crucial legal document that outlines the terms for the distribution of the earnest money deposit in the event of a canceled sale. Understanding the terms of this agreement is essential for both buyers and sellers, as it can have a significant impact on the final outcome of a real estate transaction.