Understanding Earnest Money and Your Rights
Are you a prospective homebuyer or seller in the Denver area? Did you think you found the perfect deal but now worry that an inspection or appraisal might reveal issues or lower the property's value? Are you aware of the deadlines associated with Earnest Money disputes? GLO specializes in guiding buyers and sellers through the legal complexities of real estate transactions to protect their rights and obligations.
What Is Earnest Money and Why Does It Matter?
Earnest Money is a deposit a buyer makes when submitting an offer on a home to show serious intent. This deposit, typically applied toward the purchase price at closing, is held by a neutral third party—often a title company—while the transaction proceeds. It gives both sides time to complete key steps like inspections, appraisals, title review, and financing. In essence, Earnest Money protects both parties and demonstrates that the buyer is acting in good faith.
Can You Get Your Earnest Money Back?
Buyers can recover their Earnest Money if they terminate the Purchase Contract for valid reasons specified in the agreement—and if they act before the deadline. Valid termination reasons often include issues with the title, HOA documents, appraisal, survey, inspection, or financing. The buyer must provide written notice of termination by the appropriate deadline. If notice is late or the reason isn’t covered by the contract, the right to a refund may be lost.
If the seller refuses to return the deposit despite proper termination, the contract outlines dispute resolution options: negotiation, mediation, or legal action. The Earnest Money Holder can either wait for litigation, file an interpleader with the court, or release the funds to the buyer if no legal action is taken within 120 days.
When Might You Lose Your Earnest Money?
Buyers risk forfeiting their Earnest Money if they cancel the contract for reasons not allowed under the agreement, miss key deadlines, or back out of the deal without cause. These situations allow the seller to keep the deposit as compensation for time lost or other damages.
To protect your Earnest Money, it’s critical to understand the contract’s termination provisions and timelines. GLO helps buyers determine if they have a valid basis to terminate, ensures notice is given properly and on time, and steps in to resolve any Earnest Money disputes efficiently and strategically.
How Can GLO Help?
GLO offers full legal support for both buyers and sellers in real estate transactions. We review and draft contracts to ensure they're clear and legally sound, assist with negotiations, advise on contract terminations to protect your Earnest Money, and guide you through dispute resolution, including mediation or arbitration when needed.
Avoid costly missteps and ensure your rights are protected. Contact GLO today to schedule a consultation. Fill out an Intake Form to get started.
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