Really, it’s more than just cash.
Your earnest money or deposit needs to be deposited within the specific timeframe outlined in your home sales contract. That contract will give you the framework and required deadline, but know you need to follow certain specific steps.
As a quick refresher… when you put in an offer to buy a home, your sales contract included a paragraph stating the amount of deposit you will put in escrow if the contract was accepted. This deposit is known as earnest money which demonstrates your sincere commitment to buying the home.
Although many mortgage websites recommend a percentage range to calculate a reasonable earnest money amount, the actual amount may be the key term that helps you win over other competitive offers. Your agent should be able to give you the best recommendation based on the local market, but in the Vienna real estate market large deposits are critical.
Have your deposit ready
Now that your contract has been accepted, delivering your earnest money to the escrow agent specified in your contract is essential. Although the deposit needs to be made in five days in Virginia, the local Realtor contract allows for both parties to agree when the deposit needs to be made.
There are a few ways to deliver the money, to the settlement or escrow agent, but remember it is vitally important that you understand that you need to stay vigilant.
Anti Fraud Warning
Please be extremely aware that there are various email, text, and social media scams involving wiring funds, like an earnest money deposit, involved in real estate transactions nationally. These scams involve authentic-looking emails to get information or will direct users to a fake website that provides fake wiring instructions.
I do not send out instructions to wire funds to my clients.
I tell my clients if they get an email from me or a settlement company, lender, attorney, or another person claiming to be involved, then pick up the telephone and give me a call. My experience has been that your settlement company will send instructions at the start and they won’t change them at any point during the transaction.
Let’s reverify all steps before sending your money anywhere.
If you have been a victim of wire fraud, you should immediately contact your bank to issue a recall notice and file a complaint with the FBI at ic3.gov right now.
Yes, personal checks are still a thing!
Delivering a personal check to the settlement company can be done in person at their office. It is essential that you get written acknowledgement that they have received the check. They should also email all parties that the earnest money deposit has been received per the contract.
If you must mail the check, it needs to be via an overnight courier like FedEX, USPS, or UPS. That way you can track the envelope and have documentation that the deposit was delivered before the deadline.
For added protection, your settlement company may use a secure service that protects you and them. This “2020 solution” has reached acceptance as consumers want to limit exposure to fraud and Covid-19.
A good example is Zoccam.com which is a secure platform designed to deliver earnest money deposit checks. Take a tour through the website and you’ll probably kick yourself for not inventing this app.
They also may give you bank routing information directly to their specific account at Bank of America or TD Bank which you should also reverify before hitting “send”.
Protecting your Earnest Money
Earnest money is part of your downpayment and will show up on your closing documents as a credit.
Your real estate agent should explain how you will get this money back if you decide not to buy the home during your home inspection period, or if you get rejected for financing. The process should be clear to you in any contingency that the deposit will be returned in full if both parties agree to void the contract.
You can lose this money if you default on your contract. For example, if you do not provide the required paperwork to your mortgage lender, or do something irrational like buying a new car because it will impact your credit rating and final lender approval.
Talk with your real estate agent about the terms of your sales contract and risky behavior to avoid prior to closing.