Earnest money plays a crucial role in buying or selling a property. While the law doesn’t require earnest money, buyers typically offer it as a show of good faith. It demonstrates their commitment to purchasing the property, as well as provides the seller with assurance.
In Ohio, this amount is typically 1-3% of the purchase price. For security and transparency, a third-party escrow agent holds this money until closing. However, disputes over this deposit can arise, leading to complications in the real estate process.
Missed deadlines
Property transactions typically have specific timelines. For example, a buyer might have ten days to complete a home inspection or 30 days to secure financing. The consequences of missed deadlines depend on the terms outlined in the purchase agreement.
Some contracts may include provisions that automatically end the agreement if either the buyer or the seller misses certain deadlines. Others may require the parties to take specific actions, such as renegotiating terms or extending the timeline. However, issues might escalate to court if the parties cannot reach an agreement through negotiation or mediation.
Unfulfilled contingencies
Real estate contracts often include contingencies that parties must meet for the transaction to proceed. Common contingencies include:
- Home inspections: Ohio law requires sellers to disclose known defects. However, buyers often add an inspection contingency to request repairs or cancel the purchase if they find major problems.
- Financing: This contingency protects buyers if they cannot get a mortgage as outlined in the contract, allowing them to cancel the deal and possibly get their earnest money back.
- Appraisal: If the home does not appraise for at least the agreed-upon purchase price, this contingency can protect the buyer’s earnest money if they cancel the contract.
Even with these contingencies in place, disputes can still arise. In such cases, most real estate contracts provide ways to resolve disagreements without going to court, such as arbitration. However, litigation may occur if one person refuses to use these alternative methods or disagrees with the arbitration result.
Don’t let good intentions go unguarded
Real estate transactions involve many moving parts, and it is easy to miss crucial details and contingencies. Before entering into any agreement, it is wise to consult with a real estate attorney.
