Are you looking for a forever home in Texas? Were you able to secure all the needed requirements? Texas is a beautiful place to build your dream home and settle down. It is one of the fastest-growing states with a reasonable living cost and value.
Unlike some states, life in Texas is relatively affordable, which is why many people prefer looking for a house in this area. Other factors make your offer stand out from the rest besides your paper requirements.
Want to know how much earnest money Texas requires you to give? Read on to find out.
Making Your Offer Stand Out!
The housing market, as of this date, is undoubtedly competitive. One house can have several offers from different potential buyers, and it is, in most cases, up to the buyer’s bid to dictate the whole course of “who gets the house.”
As most people know, when you want to buy a house, there are different things that sellers evaluate to check your application’s eligibility and competitiveness. If there are two or more seemingly identical offers, the seller compares the earnest money.
Making your offer stand out is crucial in successfully getting the property you wish for, but how do we do this, and how much earnest money Texas do you need?
What is Earnest Money?
Now that we have emphasized the necessity of making your offer stand out in a sea of prospective buyers, it is time to address the question, what is earnest money Texas requires you to pay?
In simpler terms, you use earnest money to reserve the real estate property you wish to acquire indirectly. Texas’ housing market is remarkably competitive, but considering earnest money will win you the property you desire.
When purchasing a home, you must show your seller that you are serious about buying that property. Before closing on a house, the earnest money is paid, usually in the form of checks, to show your sincerity.
Also known as a “good faith deposit,” home buyers who aim to buy a house or property pay a portion of the down payment as evidence of earnestness.
Although this is only an option and is not required in most cases, earnest money improves your offer and makes it a lot more competitive.
You may also visit https://homesbyardor.com/earnest-in-texas/ for supplementary information about earnest money in Texas.
Improves Your Offer, Secures Your Sellers
In real estate, earnest money is not just about showing how serious you are in proceeding with the contract and offer.
It is also helpful for the sellers who might suffer a substantial financial hit should a buyer default on their agreement or suddenly back out.
Let’s say a purchase agreement has been reached. In this case, the seller removes their property off the market to reserve it for the buyer. Afterward, both parties will proceed with the next step of the transaction until the closing phase.
However, what happens when the deal falls through? Unfortunately, we can hugely observe the impact on the seller who needs to put their property on the market and start all over again.
It is why earnest money is more than just an upfront payment. It shows that the buyer is willing to pay and will not back out without a valid and justifiable cause.
Further, it acts as a promise that the buyer will take the property, or should they decide not to, all is done in good faith.
If the buyer decides to break the agreement and back out for any invalid reason, they can never receive a refund for the money they pledge as an earnest deposit.
Follow the Customs, Offer Higher
How much is earnest money in Texas? — this is our million-dollar question.
Earnest money of 1 to 2 percent of the purchase price is generally considered reasonable, but note that an even higher earnest money deposit makes your offer more assertive and more competitive.
The bottom line is that you will decide how much earnest money (Texas) you want to give. It could be around the average or higher or lower.
So, for example, if you offer to buy a property that costs around $250,000, your earnest money deposit is attractive should it be between $2,5000 and $5,000.
In other places like California, the earnest money deposit has a minimum of 3 percent. In contrast, in other markets, sellers choose an offer between $500 to $1,000 instead of a fixed percentage for the property cost or value.
Should you wish to calculate how much you need to pay, an earnest money calculator is available online, where you can input the sale price and earnest money percentage. It is a great tool to show your needed earnest money deposit objectively.
Is there a law governing this?
Simply answering the question — no, there is not. It is more of a local tradition and custom to show your attractiveness and seriousness as a buyer. Since this is not mandatory, you can always choose not to give one.
In some cases in Texas, buyers give a fixed amount of money that costs $500 for a $300,000 house. Possibly because they come from other countries, states, or areas, but $500 is not at least 1 percent of the purchase price.
It makes this offer unattractive and creates an idea that they are not very “earnest” about purchasing the property. It is crucial to follow local traditions in this field of business as lower earnest money can be seen as insulting.
Where Do You Give The Earnest Money?
In Texas, you give the earnest money to an escrow agent, a third party that can hold the funds while the transaction is finalized. It should be trustworthy and, as much as possible, not affiliated with any existing party to avoid bias.
While you are in the midst of a transaction, you may be served by various escrow firms and organizations. Because there are businesses that exclusively conduct their operations inside a specific state, you may wish to investigate them and learn more about the extent of their operations.
Cases Where Refunds Are Possible
Is earnest money refundable? Yes. However, this is not the case all the time. In situations where the transaction does not close, it is within the terms of the contract that will determine who is entitled to the earnest money.
For example, should the buyer discover that the house or property is not how it should be after moving in and there is an existing clause in their contract about how to handle this kind of situation, the buyer can validly cancel the contract for a good cause.
Demanding the deposit back is possible in that situation.
There are also some cases wherein discrepancies in the property’s appraised value may arise after the transaction or while parties are still in the middle of the deal.
Should the property title have issues, getting your money back can be a reasonable cause if the purchase contract is not yet completed.
Please be informed that personal reasons like wanting another property are not a valid cause for demanding a refund from the seller.
For example, a buyer backing out from a deal because they decided to proceed with another property is not entitled to refund earnest money since the seller that the buyer had a transaction first lost their time and effort due to the latter’s promise.
The earnest money is now a forfeited deposit and compensates the seller.
Others resort to court when things become complicated because it may be difficult to check who should get the earnest money, which is one reason why. In other situations, it might be challenging to determine who should be given the earnest money.
Earnest Money and Closing
Once the buyer and seller have come to an agreement and are ready to go forward with the closing process, the money you provided as a good faith deposit will be deducted from the total amount you need to pay for the property.
The earnest money is not just favorable to the seller but also allows you to put some money on the table, thereby lessening the amount you need to pay during the closing.
Delivering the Earnest Money
Different payment methods include certified checks, wire transfers, and personal checks. Buyers may choose any of these methods, which may also have additional fees according to their banks.
In many nations and states, putting down an earnest money deposit, often referred to as a good faith deposit, is required when purchasing a home or other real estate.
In Texas, paying 1 to 2 percent is already a commendable manifestation of your “earnestness” as a buyer.
The above practice makes the buyers feel more secure since they have some money to lose should they break the contract or agreement for invalid or unjustified reasons.
Make sure to read through your earnest money contract. Texas law does not require any earnest money deposit, but it will make your offer more robust and appealing to the seller.
Do you need a real estate professional to help you process your earnest money? Contact Homes by Ardor to inquire.