Earnest money, or a good faith deposit, is an amount paid by the buyer at the time an offer is made on vacant land for sale. After the buyer and seller agree on a purchase price, a contract is then signed and the buyer provides the earnest money. This deposit shows the seller that the buyer is serious about following through on their agreed upon contract.
The amount of earnest money paid is negotiated between the two parties, but usually ends up being a small percentage of the purchase price of the vacant land for sale. The agreed upon amount is included in the signed contract along with what happens to the deposit should the deal fall through. Buyers may want a refund clause in the contract for any number of reasons, for example not being approved for financing. Sellers may want a forfeit clause as compensation for their time in the case that the buyer suddenly decides they no longer wish to purchase the land. The terms of the contract should be negotiated between the two parties and understood before signing.
Also included in the contract are specifications as to who will be responsible for holding the deposit. Most earnest money is handled by a real estate agent or broker in an escrow account. It is not recommended to deliver the deposit directly to the seller or any third party that you cannot 100 percent trust. With escrow accounts, it’s important to be aware that your deposit may sit in the account for a long period of time if the deal were to fall through, especially if terms of the contract are not extremely clear. In the worst case scenario, you may have to go to court to retrieve the money from the account.
Understanding the terms and conditions of a contract involving earnest money are essential to closing on any land deal. Be sure to speak with knowledgeable individuals, such as a real estate agent or broker, if you are involved in a real estate transaction.
If you are interested in purchasing vacant land for sale, AllAcres can help. Our website instantly puts you in front of hundreds of available listings across the United States. For more information on vacant land for sale or any questions on real estate transactions, please call AllAcres at (855) 227-3741 or contact us online today.