Share
References
NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
Is Earnest Money Refundable?
Is Earnest Money Refundable? Here’s What to Know (Realtor.com®, Aug. 1, 2022)
There are several scenarios when a buyer could face forfeiting their earnest money. If a buyer waives contingencies, ignores timelines, or gets cold feet, it could mean losing the earnest money deposit. "When it comes to real estate, a case of buyer’s remorse could be even more painful than a lost deposit. To avoid both, really make sure the home you’re bidding on is “the one.”"
10 Ways Earnest Money Is Not Refundable:
- Failing to Meet Deadlines
- Getting Caught Up in a Bidding War
- Agreeing to a Non-Refundable Earnest Money Deposit
- Waiving Contingencies Prematurely
- Failing to Do Due Diligence
- Failing to Understand As-Is Buying
- Voiding a Contract Without a Refund
- Deciding the Home Isn’t “The One”
- Developing “FOMO” Over Another Home
- Bailing on a Transaction for Personal Reasons
Source: 10 Ways to Lose Your Earnest Money Deposit (Endpoint, Apr. 14, 2022)
Escrow Real Estate Accounts
What is Escrow and How Does It Work? (Credible, Mar. 20, 2024)
Escrow accounts function in two ways. While going through the steps of a real estate transaction, your escrow account will safely hold and protect any funds, like your earnest money deposit. Once the transaction is complete and the property has been purchased, your escrow will be used to collect and disperse funds to pay for property taxes, mortgage insurance, etc.
What Is Escrow and What Are Its Benefits? (Houzeo, Feb. 17, 2024)
Escrows ensure that no funds are released until the conditions of the real estate contract are fulfilled.
What is an Escrow Account and How Does It Work? (CNBC, Dec. 1, 2023)
Buyers are often asked to put a deposit down to show their interest is legitimate, especially if the down payment is less than 20% of the total purchase price. To protect both them and the seller, that deposit is put into an escrow account until the sale is completed. If the seller stops the sale, the funds in escrow are returned to the buyer. If the deal is interrupted because of the buyer, though, the seller typically keeps the money.
Understanding the Escrow Process and Requirements (Investopedia, May 17, 2023)
One of those hard-to-understand elements is the process of being in escrow. An escrow account is a third-party account that holds a good faith deposit payment for the house, which eventually goes towards the downpayment of the house if the sale moves forward. Escrow occurs between the time a seller accepts the offer and the buyer gets the keys to the new house.
Earnest Money Deposits
What is an Earnest Money Deposit? A Guide for Buyers and Sellers (The Zimmern Team, Mar. 11, 2024)
An earnest money deposit isn't required, as there are no laws stating that home offers must have money attached to them. But it’s a common practice and even a necessity, especially if you’re shopping for a home in a competitive market. Sellers are likely to favor an offer that includes an earnest money commitment as it provides them extra assurance. If it’s a seller’s market and you’re going up against multiple offers, you might be better off submitting an offer with earnest money attached.
Earnest Money: What It Is, and How Much It Is in Real Estate (Investopedia, Jun. 30, 2023)
Should a buyer break the terms of the contract, they may be at risk of losing their earnest money deposit.
What is Earnest Money and How Much Do I Need? (HomeLight, Jun. 28, 2023)
If you don’t want to lose the house, you may decide to leave 10% as your earnest money deposit. The larger your deposit, the stronger your offer, so it can be advisable to leave more. Just make sure you keep up your end of the deal so you don’t forfeit the money.
What is Earnest Money and How Much Should You Pay? (Entrepreneur, Feb. 9, 2023)
“Put simply, earnest money is a deposit made before closing on a house purchase. In essence, earnest money works as a way of showing that a homebuyer is serious about buying the house and isn't just trying to cut out any competition/competing bids. Also called a good faith deposit, an earnest money deposit is often required or requested by a home seller if they are expected to take a house off a competitive market.”
The Earnest Money Deposit: How It Helps Buy a Home (realtor.com®, Oct. 5, 2022)
“Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront. In many circumstances, buyers can get most of the earnest money back if they discover something they don’t like about the home.”
Escrow Fraud and Real Estate
How’s the Market? As Fraudsters Get More Sophisticated, You Should Too (The Ukiah Daily Journal, Mar. 7, 2024)
It doesn’t seem to matter how many times lenders and escrow officers tell their clients to confirm any changes to wire instructions before sending money. Many customers circumvent safety measures. Clearly, no one wants to lose tens or even hundreds of thousands of dollars, so why do they ignore the advice of trusted advisors? It’s because they think they are following their advice.
Money Wire Scams: How to Protect Yourself (Blue Fire Mortgage, Feb. 22, 2024)
It is also extremely rare for wire instructions to change during a real estate transaction. When you get wire instructions from an escrow or title company, call them directly and confirm the information over the phone.
Southern California Couple Lost $160,000 in a Rapidly-Growing Down Payment Scam (NBC Los Angeles, Feb. 22, 2024)
Lawlor received wire instructions for the down payment in an email that appeared to be from the escrow agent. So he wired the money – $160,000. Then a few days later, he received another email from his escrow agent.
“He said, 'We’re clear to close, we’re all set here, just need your down payment,’” said Lawlor.
The Lawlors money was gone. The email that appeared to be from the escrow company wasn’t. Instead, it was from a scammer, with an email signature exactly the same as previous emails, and a friendly note that addressed Lawlor by name.
Are You Buying a New Home or Refinancing? Please Read This First! (Oregon Department of Justice, Jan. 12, 2024)
Be suspicious of any email, text message, or telephone call telling you there has been a last-minute change to the wire instructions.
Case Summaries - Escrow Mishandling
Garden City Attorney Embezzles $700K From Client's Escrow Funds: DA (Daily Voice, Apr. 11, 2024)
As part of his responsibilities, Boldi was to give $309,367 to the couple’s mortgage lender to pay off the East Meadow home’s mortgage after he received the loan funds from the home buyer’s mortgage company.
However, Boldi is alleged to have lied to the couple, saying that the money from the buyer’s lender was never transferred to his escrow account; because of this, the parties agreed to a “dry closing,” where all closing requirements are fulfilled besides the disbursement of funds, with the deed held in escrow.
Just days later, Boldi reportedly showed the couple a fake wire request document as proof that their mortgage payoff funds were sent to their mortgage company, allowing the sale to be completed and the deed of the home to be released.
Riverhead Attorney Arrested for Grand Larceny (Riverhead News- Review, Dec. 14, 2023)
Peter A. Saad Jr., who maintains a law office on East Main Street, was hired in 2020 by a client to facilitate the sale of a home, Mr. Tierney’s office said. In the course of the transaction, it was determined that permitting issues would require that $25,000 be left in Mr. Saad’s escrow account after the Sept. 3rd closing date, until the permit issues were resolved.
The buyer was due $5,000 and the seller — Mr. Saad’s client — was due $20,00. Yet once the deal closed, according to authorities, Mr. Saad stopped responding to both parties, kept the escrow accounts funds and used them for his own personal expenses.
Disbarred N.J. Lawyer Accused of Stealing $1M from Clients has Charges Reinstated (NJ.com, Nov. 28, 2023)
Real estate attorneys often temporarily hold large sums of client money in separate trust accounts, also called escrow, for down payments and other transactions.
Salami, who was based in Hazlet in Monmouth County, either failed to use trust money for the client real estate deals or pocketed it for personal use, authorities alleged.
Owner of Allentown Title Company Accused of Using Millions of Clients' Dollars (WFMZ, Oct. 6, 2023)
The lawsuit alleges the Allentown-based business, which went out of business in September, is short $5.6 million in funds to pay third parties. Instead of paying off clients, the lawsuit says Belletieri moved the money into his own accounts to pay for online sports gambling and gold bars and coins. The lawsuit claims as recently as the middle of September, Belletieri withdrew over $100,000 from escrow accounts to put into his own.
Roswell Real Estate Escrow Manager Pleads Guilty to Fraud (KRQE, Apr. 27, 2023)
“A local business owner has pled guilty to fraud in a federal court. The 44-year-old Christopher Adam Jensen-Tanner admitted to misusing tens of thousands of dollars worth of business funds.
Jensen-Tanner owned and operated Roswell Escrow Services, Inc. The business appeared to help customers make real estate purchases, according to an indictment filed in federal court. But Jensen-Tanner re-directed funds for personal use, according to his plea.”
eBooks & Other Resources
The following eBooks and audiobooks are available to NAR members:
American Mortgage - Everything You Need to Know About Purchasing and Financing A Home (eBook)
Busted - Life Inside the Great Mortgage Meltdown (Audiobook)
Chain of Blame - How Wall Street Caused the Mortgage and Credit Crisis (eBook)
The Complete Idiot’s Guide to Mortgages (eBook)
Decoding the New Mortgage Market (eBook)
Fast Track Your Mortgage (eBook)
How to Save Thousands of Dollars on Your Home Mortgage (eBook)
How to Sell a House When It is Worth Less than the Mortgage (eBook)
Insider Secrets to Financing Your Real Estate Investments (eBook)
The Insider's Guide to Home Equity Borrowing (eBook)
An Insider's Guide to Refinancing Your Mortgage (eBook)
The Little Black Book of Wealth Building Mortgage Secrets (eBook)
The Mortgage Answer Book - Choosing the Right Loan for You (eBook)
The Mortgage Encyclopedia (eBook)
Mortgage Myths - 77 Secrets that will Save You Thousands on Home Financing (eBook)
Mortages 101 (eBook)
Mortgage Rip-offs and Money Savers (eBook)
The new rules for mortgages (eBook)
The Pocket Mortgage Guide (eBook)
Reverse Mortgages for Dummies (eBook)
Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities (eBook)
Have an idea for a real estate topic? Send us your suggestions.
The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.