Thematic- since the theme of this blog is ‘real estate’, posts about transactions, buying, selling, procedures, practices, and such will show up on Thursdays.
Each state in the Union has different laws and different customs regarding property exchanging hands. If you have bought a house in one state, don’t assume you know how things are going to work in a different state.
In Texas, our state legislature meets every other year, and as a result, transaction or contract laws change on the same schedule. If you bought or sold a home in Texas more than two years ago, chances are SOMETHING will be different this time ’round.
On the very first page of a Texas Real Estate Commission promulgated contract for purchase of a home, there is a paragraph in which an amount for earnest money is filled in, and the person/institution it will be deposited with is named. Typically, in ‘these here parts’ (antiquated Texan-speak), your earnest money deposit is about 1% of the purchase price. This will be in the form of a cashier’s check made out to the title company’s escrow officer, or it will be wired from your account into the title company’s escrow account. It should be delivered within three days of the contract being signed by all parties.
In the case of a ‘hot’ property, there could be several, or many, offers coming in quick succession. If you are making an offer on such a property, there are various ways to make your offer stand out in the crowd, and one way is to put more than 1% of the purchase price into escrow as earnest money. This would show that you are very earnest, indeed.
Your earnest money will come back to you, if you decide not to buy the house within your designated option period, and it will be applied to your purchase if you complete the transaction. (There are other circumstances under which your earnest money can come back to you if the transaction is not completed, but terminating the contract during the option period is the most common reason.)