The Real Estate Deposit
Feb. 6, 2023
When purchasing property in New Jersey, the earnest money deposit is typically handled by an escrow agent, like the seller’s lawyer, or the settlement agent, like the title company. This is an intermediate step during the home buying process, where money is collected and documents are prepared to finalize the sale of the home. The purpose of earnest money is to legally bind you to the transaction and create a penalty if you break a mutually signed contract of sale.
A buyer may be entitled to a return of the deposit, however, based on the contract’s cancellation contingencies. One of the most common real estate contingencies in New Jersey is an inspection contingency, which allows the buyer to have a professional home inspector inspect the property before finalizing the sale and potentially receive their deposit back if the inspection reveals anything that is not satisfactory.
Another common contingency is the financing contingency, which allows the buyer to receive their deposit back in the event that they are unable to secure financing for the purchase. Additionally, a real estate contract in New Jersey should also include an appraisal contingency, which allows the buyer to receive their deposit back if the appraisal value of the property comes in lower than the purchase price.
Finally, it is also important to include a title contingency, which allows the buyer to receive their deposit back if the title search reveals any liens or encumbrances on the property, and to ensure that there is a clearly identified ownership of the property.
In short, these contingencies are important to include in a real estate contract in order to protect the buyer's deposit and to ensure a smooth sale. The real estate deposit is one of the important pieces when buying or selling a property.