Escrow deposits and down payments

Will you need to place an kind of deposit down payment?

In typical circumstances, a contract to purchase a US property is backed up with a pledged, earnest money deposit. This is normally a check or wire transfer to the Closing Agent that accompanies a contract, or is sent shortly after to demonstrate that the buyer is serious about their intent to purchase. Essentially, it expresses the buyers desire to enter into an agreement with the seller and prevent the seller selling the property to anyone else.

In most cases the funds are held by the Closing Agent in an ‘Escrow’ account. An escrow account is in effect a trust account that belongs to neither the buyer or the seller, but is there to be dispersed in accordance with the terms of the contract it accompanies. For example, if the contract closes as planned, the escrow deposit will go to the seller as part of the closing funds. If on the other hand, the buyer is unsuccessful at obtaining a loan, the deposit will be returned to the buyer. If either party defaults and does not satisfy their obligations under the terms of the contract, the other party may be able to claim the deposit as liquidated damages. There are many variations to this scenario, so the best thing to do is to engage a real estate professional to help you and ensure the most advantageous position when buying or selling US real estate.

Legal Matters
As discussed earlier, some buyers and sellers of US real estate choose to involve a lawyer within the transaction. The lawyer will work for one side or the other, i.e. buyer or seller, but not both. Their job will be to act in the best interest of their represented party, advising on matters such as the terms of the contract or the best way in which to assume title to the property. It is not mandatory for either buyer or seller to engage a lawyer in order to transact real estate, however many lawyers will advise that it is best to do so.