Realtor.com reported that Florida residents purchased over 280,000 homes in 2022. If you hope to become a Florida homebuyer, you will likely come across the term “earnest money.” This upfront payment serves as a sign of your serious intent to purchase a property.
In Florida, earnest money often goes into an escrow account. This ensures that neither the buyer nor the seller has direct access to the funds until the sale closes or the agreement falls apart. However, specific situations might cause you to lose your earnest money.
Miss the closing date
If you fail to close the deal by the specified date in your purchase agreement, you risk forfeiting your earnest money. It is important to manage your responsibilities and ensure all paperwork and requirements are in order well before the closing date to avoid this scenario.
Back out without a reason
Purchase agreements typically contain contingencies that protect the buyer. These can include inspection results, financing approval or appraisal outcomes. If you back out of the purchase without invoking one of these contingencies or after their respective periods have lapsed, the seller can claim your earnest money.
Do not adhere to the contract terms
Your purchase agreement spells out the terms and conditions of the sale. If you violate any of these terms, you may lose your earnest money. For instance, if the agreement requires you to apply for financing within a certain number of days and you miss that deadline, the seller might have the right to keep your deposit.
Protect your earnest money
To safeguard your earnest money, always read and understand the purchase agreement thoroughly. Know the deadlines and adhere to them. Additionally, ensure you communicate effectively with the seller or their representative. If issues arise, address them promptly and find solutions that work for both parties.
When you know what things to avoid, you can reduce the chances of losing your deposit. Always make informed decisions and act in a timely manner to ensure a smooth home-buying process.