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Buying a House – Earnest Money Question

by Maureen McCabe on November 19, 2007

checkI received a question via Contact Request rather than as a comment on the post that I assume  comes from an earlier entry on ColumbusBestBlog.com.  The question is NOT about Columbus or Central Ohio, it is about Rhode Island. Previously about earnest money on ColumbusBestBlog.com :

“Kiss your $2,500 earnest money deposit goodbye”

What is Earnest Money?

“If sale doesn’t close, can money be refunded in FSBO deal?”

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—-         Contact Request         —-
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Date of Request: 11/18/2007
Subject: earnest money
Message: i gave 1000 check made out to my agents co. for the purchase of a house in rhode island…i noticed the check was cashed before we even set a closing date. are they suppose to cash the check or hold it until closing?? what if the deal falls through??? what happens to my 1000
Contact Method: By Email
Name: _____ _____
Email: Home phone:
Work phone:
Fax:
Address:

MY response:

1. Read your contract, what does the contract you have with the seller  say about the path your earnest money will take during the transaction, when it will be deposited, what happens if the transaction does not close.


2.
If you are incapable of reading your contract for some reason have your real estate agent read it to you and ask the appropriate questions re: what will happen to the earnest money in your transaction, when it will be deposited, what happes if the transaction does not close, etc.

3. Hire a real estate attorney in your area who can read and interpret for you what is supposed to happen with the purchase money by Rhode Island State Law and whether the licensee is following the contract and state laws regarding depositing earnest money.

Real estate is local.

Only a real estate attorney  or a party to the contract or the real estate agents who negotiated the contract would have the information you are seeking about your transaction.

With the purchase contract used in the Central Ohio area by members of the Columbus Board of Realtors, the earnest  money would certainly be deposited into an earnest money account per the terms of the contract… at least the way the contract is pre-printed, the earnest money is deposited immediately… any terms negotiated in the contract re: earnest money to the contrary (deposited upon accceptance of the contract, deposited after home inspection,  deposited on Friday or Tuesday (a specific date, I’d assume), deposited contingent on something else happening,  depositied when closing is scheduled (I don’t know why closing date would be used for a contingency for the earnest money to be deposited…  but it could be I suppose as long as a seller agreed to it…) All that would be negotiated between buyer and seller in the terms of the purchase contract.

At least in our local, Central Ohio Columbus Board of Realtors Purchase contract the readers questions:

“ what if the deal falls through???”

and

“what happens to my 1000″

are carefully spelled out in the contract to the parties to the contract, buyer and seller.  I would assume the purchase contract in Providence R.I. would spell out the answers to the readers questions but I sure don’t have a way of reading that contract…

nor would I…

Good luck in Rhode Island…

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{ 2 comments }

1 Karen Hurst November 19, 2007 at 01:24 pm

Normally, in Rhode Island, the earnest money is cashed by the Brokerage that has the listing. This money is put into an escrow account and held by that Brokerage until such time that the transaction is finalized/and/or null and void. Most such deposits are refundable if they are on an Offer to purchase and through no fault of your own, (meaning the seller rejects your offer), the transaction does not materialize. You should definitely ask your agent this question. Broker Associate, Storm Realty

2 Maureen McCabe November 19, 2007 at 02:24 pm

Karen thanks for the comment. I am hesitant to answer this sort of question in my own market for somone who is represented by a real estate agent (maybe I am assuming that, maybe she working directly with the listing agent.) No matter what I would think you’d direct the question to someone involved in the transaction.

Or direct a legal question to a real estate attorney. I don’t want to be caught giving legal advice to anyone, other than “contact an attorney.”

In our market typically the earnest money is held in the earnest money account of the agent working with the buyer, not the listing company. That as true in the Dayton area where I first sold too. I know when I first heard that I wondered why it was not held by the listing brokerage. Occasionlly on a bank property it says in the mls that the earnest money is to be held by the listing brokerage.

The real estate purchase contract we use in Central Ohio has extensive language about what happens with the earnest money if the transaction closes, if the transaction does not close, if there is a dispute between the buyer and seller over who gets the earnest money if the transaction does NOT close.

Long ago I remember people assuming their check was just going to be held in a folder and given back to them at closing….

Again thanks for the comment.

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