The New Earnest Money Delivery Date Sample Timeline

FROM THE CONTRACT:

“IF THE LAST DAY TO DELIVER THE EARNEST MONEY FALLS ON A SATURDAY, SUNDAY, OR LEGAL HOLIDAY, THE TIME TO DELIVER THE EARNEST MONEY IS EXTENDED UNTIL THE END OF THE NEXT DAY THAT IS NOT A SATURDAY, SUNDAY, OR LEGAL HOLIDAY.”

IMPORTANT TIPS:

– EARNEST MONEY CANNOT BE DELIVERED ON A SATURDAY, SUNDAY OR LEGAL HOLIDAY. HOWEVER, YOU DO COUNT SATURDAY, SUNDAY AND LEGAL HOLIDAYS AS EFFECTIVE DAYS WHEN COUNTING THE THREE DAYS, BUT NOT AS THE DELIVERY DATE. THE DELIVERY DATE IS THE NEXT BUSINESS DAY.

– WHILE EARNEST MONEY IS NOT
REQUIRED TO BE DELIVERED UNTIL THE 3RD DAY, IT IS RECOMMENDED TO DELIVER THE CHECK DURING BUSINESS HOURS TO OBTAIN A RECEIPT OF EARNEST MONEY FOR THE DELIVERY.

 

Click here for printable version.

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What Is Earnest Money

What is Earnest Money

Earnest money is a deposit made to a seller that represents a buyer’s good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal and inspections before closing. In most cases, earnest money is delivered when the sales contract or purchase agreement is signed, but it can also be attached to the offer. Once deposited, the funds are typically held in an escrow account until closing, at which time the deposit is applied to the buyer’s down payment and closing costs. 

Earnest money is also known as an escrow deposit or good faith money.

Reasons to Pay Earnest Money

When a buyer decides to purchase a home from a seller, both parties enter into a contract. The contract doesn’t obligate the buyer to purchase the home, because reports from the home appraisal and inspection may later reveal problems with the house. The contract does, however, ensure the seller takes the house off the market while it’s inspected and appraised. To prove the buyer’s offer to purchase the property is made in good faith, the buyer makes an earnest money deposit (EMD).

When Earnest Money Is Refundable

The buyer may be able to reclaim the earnest money deposit if something that was specified ahead of time in the contract goes wrong. For instance, the earnest money would be returned if the house doesn’t appraise for the sales price or the inspection reveals a serious defect – provided these contingencies are listed in the contract.

Of course, earnest money isn’t always refundable. For example, the seller gets to keep the earnest money if the buyer decides not to go through with the home purchase for contingencies not listed in the contract, or if the buyer fails to meet the timeline outlined in the contract. And, not surprisingly, the buyer will forfeit the earnest money deposit if he or she simply has a change of heart and decides not to buy. 

Earnest money is always returned to the buyer if the seller terminates the deal.

How Much You Pay in Earnest Money

While the buyer and seller can negotiate the earnest money deposit, it often ranges between 1% and 2% of the home’s purchase price, depending on the market. If a home costs $250,000, a 1% earnest money deposit would be $2,500; at 2%, the deposit would be $5,000.

In addition to the local market rates, the size of the earnest money deposit depends on the level of interest other buyers have expressed, how hot the housing market is and how quickly a prospective buyer can close on his or her offering price. In hot housing markets, the earnest money deposit might range between 5% and 10% of a property’s sale price.

While the earnest money deposit is often a percentage of the sales price, some sellers prefer a fixed amount, such as $5,000 or $10,000. Of course, the higher the earnest money, the more serious the seller is likely to consider the buyer. Therefore, a buyer should offer a high enough earnest deposit to be accepted, but not so high as to put extra money at risk since there’s still a chance that the deal might not go through and the deposit not refunded.

Earnest money is usually paid by certified check, personal check or a wire transfer into a trust or escrow account that is held by a real estate brokerage, legal firm or title company. The funds are held in the account until closing, when they are applied toward the buyer’s down payment and closing costs. It’s important to note that escrow accounts, like any other bank account, can earn interest. Therefore, if the earnest funds in the escrow account earn interest of more than $5,000, the buyer must fill out tax form W-9 with the IRS to receive the interest.

Protecting Your Earnest Money Deposit

Prospective buyers can do several things to protect their earnest money deposits.

  • Make sure contingencies for financing and inspections are included in the contract. Without these, the deposit could be forfeited if the buyer can’t get financing or a serious defect is found during the inspection. 
  • Read, understand and abide by the terms of the contract. For example, if the contract states the home inspection must be completed by a certain date, the buyer must meet that deadline, or risk losing the deposit – and the house.
  • Make sure the deposit is handled appropriately. The deposit should be payable to a reputable third party, such as a well-known real estate brokerage, escrow company, title company or legal firm (never give the deposit directly to the seller). Buyers should verify the funds will be held in an escrow account and always obtain a receipt. 

Source: https://www.investopedia.com/terms/e/earnest-money.asp

ABCs of Title Commitment

A Commitment is a document the title company provides to all parties connected with a particular real estate transaction. It discloses the title of record to the property as well as all the liens, defects, burdens and obligations that affect the subject properties. It is comprised of four schedules.

Schedules A, B, C and D are as follows:

Actual Facts
Is the Who, What, Where and How Much section of the Commitment. You will see the names of the buyer, record owner (seller), a legal description of the property, the sales price and the name of the lender, if applicable. It is a good idea to double check this information with the contract.

Buyer Notification
This section lists the general and specific exceptions to the property. It will list
items such as survey matters, taxes, easements, setback lines and a variety of other items that will not be covered by the title policy. It is important to review and discuss any questions you have with your title company.

Clear in Order to Close
These items must be resolved in order to transfer title to the new owner. They might include such things as a mortgage that will be paid off at closing, liens for home improvements or unpaid taxes. All items shown on Schedule C should be discussed and resolved before the closing.

Disclosure
This section outlines the ownership of the title company and all the parties who will share in any part of the insurance premium collected to issue the policy. It includes underwriters, title agents and attorneys.
This information is not to be substituted as legal advice and is descriptive only. If you have any concerns about any portion of your title commitment or any portion of Schedule A,B,C, or D, please contact your attorney.

This information is not to be substituted as legal advice and is descriptive only. If you have any concerns about any portion of your title commitment or any portion of Schedule A,B,C, or D, please contact your attorney.

ABCs of Title Commitment

 

 

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Survey Deletion Coverage Q&A

What is Survey Deletion Coverage?

Survey Deletion Coverage is often also referred to as “Survey Deletion”, “Survey Amendment”, and “Survey Coverage.”  When survey deletion coverage is given in the title policy it offers Buyers protection for errors or omissions that may have been made by the surveyor and accepted by the title company by changing the language in the “standard exception” of the title policy to read “Shortages in Area” only.  The “standard survey exception” in a title commitment or policy (before being amended) reads:

“Any discrepancies, conflicts, or shortage in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements.”

 Upon receipt of an acceptable survey, the title company may amend this exception to read “Shortages in area” only.   Things that a title company will look at to determine if a survey will be acceptable include, but are not limited to, the following:  that items noted on the survey are listed in the title commitment, verify the legal description, check platted building lines and platted easements, and other matters such as the seal and signature of the engineer, date of the survey, and north directional arrow. 

Survey Deletion is addressed in paragraph 6. A. (8) of the TREC One to Four Family Residential Contract, where the parties select between the options of amending or not amending the standard exception in the title policy and who will be responsible for the payment of the premium.

There are other issues that may show up in the review of a survey, such as a building or driveway or fence over a building line, or into a platted easement.  When this happens, the title company may still accept the survey and amend the standard exception to read “Shortages in Area” only, but will generally add a special exception on Schedule B of the title commitment and owner’s title policy for any of these issues that were shown on the survey.              

The cost of survey deletion coverage on residential transactions is 5% of the Owners Title Policy Premium, and is 15% of the Owner Title Policy Premium in a commercial transaction.

For more information on Survey Deletion Coverage, download our Survey Deletion Coverage Q&A flyer 



The Closing Process

You finally found THE ONE and put in an offer that was accepted… now what? The process is just beginning for the behind the scenes team that make your dreams a reality and help get you into your new home. We’ve put together a comprehensive chart of the closing process that begins once you are under contract to help you better understand the whole process. You (the buyer), your REALTOR®, Mortgage & Title Companies have lots to do before you get to the closing table and get those keys in hand. Here’s a look at the process.

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Helpful Terms for Buying/Selling Your Home

Buying or selling a home is one of the most important undertakings of a lifetime. When buying or selling a home, there are many real estate terms that may be unfamiliar to you. Check out this list of commonly used terms that you may find helpful during the process.

AIR:  Adjustable Interest Rate

AMORTIZATION SCHEDULE: A schedule showing the principal and interest payments throughout the life of the loan.

APPRAISED VALUE: An opinion of the value of a property at a given time, based on facts regarding the location, improvements, etc. of the property and surroundings.

CD/CLOSING DISCLOSURE: This form is a statement of final loan terms and closing costs. Sometimes referred to as ICD or Integrated Closing Disclosure.

COMMITMENT:  The document by which a title insurer discloses to all parties connected with  a particular real estate transaction all the liens, defects, and burdens and obligations that affect the subject property.

CREDIT REPORT: A report on the past ability of a loan applicant to pay installment payments.

DOCUMENT PREPARATION FEE: A charge by an attorney for preparing legal documents for transaction.

ESCROW FEE: A fee charged by the title company to service the transaction, to escrow monies, and cover documents. Usually split between buyer and seller.

ESCROW ACCOUNT: Funds held by the lender for payment of taxes and insurance when due. Usually does not include maintenance fees.

HOA ASSESSMENT FEES: Charged by the homeowner’s association as set out in subdivision restrictions.

HOMEOWNER’S INSURANCE:  Protects the property and contents in case of loss; must be for at least the loan amount or for 80% of the value of the improvements, whichever is greater.

INSPECTIONS: An examination of property for various reasons such as termite inspections; to see if required repairs need to be made before funds are received, etc.

INTEREST: Money paid regularly at a particular rate for the use of money lent.

LOAN TITLE POLICY: Required by the lender to insure that the lender has a valid lien; does not protect the buyer.

ORIGINATION FEE:  A fee the buyer pays the lender to originate a new loan.

OWNER’S TITLE POLICY: Insures that the buyer has title to the property, that there are no other claims as to ownership. Among other matters, it also insures access to the property, the right to occupy the property, good and indefeasible title, and that there are not other types of specific liens against the property. 

POINT:  1% of the loan amount.

PREPAIDS: Items to be paid by the buyer in advance of the first scheduled payment of the loan (Homeowner’s Insurance Premium, Mortgage Insurance Premium, Prepaid Interest, Property Taxes and a maximum of three additional items).

PREPAYMENT PENALTY:  Charged by the lender for premature payment of a loan balance.

PRIVATE MORTGAGE INSURANCE: Insurance against a loss by a lender (mortgagee) in the event of default by a borrower (mortgagor).

REALTOR FEES:  An amount paid to the REALTOR® as compensation for their services. RECORDING FEES: Charged by the County Clerk to record documents in the public records. RESPA:  Real Estate Settlement Procedures Act.

RESTRICTIONS: Certain limitations or conditions related to the future use of the property put on the property by a prior owner. These restrictions stay with the property until they expire or are amended as per certain procedures set forth in the restrictions.

SURVEY:  Confirms lot size and any encroachments or restriction violations.

TAX CERTIFICATES: Certificates issued by taxing authorities showing the current year’s taxes, the last year the taxes were paid, and any delinquencies to be collected at closing.

TAX PRORATION: Means that the payment of the taxes for the year of sale are divided between the Buyer and Seller, usually based on the amount of time the Seller owned the property during that year. Prorations, and how they are calculated, are typically addressed in the Contract of Sale.

TIL:  Truth in Lending.

TIP: Total Interest Percentage; the total amount of interest the borrower will pay over the loan term as a percentage of the loan amount.

TOTAL OF PAYMENTS: Total amount paid after all payments of principal, interest, mortgage insurance and loan costs are scheduled. 

To download our Helpful Terms for Buying/Selling Your Home flyer,  visit Helpful Terms for Buying and Selling Your Home.

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Republic Title Announces ALTA Best Practices Recertification

Republic Title of Texas, Inc. is proud to announce our completion of HA&W’s ComplianceSuccess® Program which certifies compliance with American Land Title Association (ALTA) Best Practices. ALTA’s Best Practices Framework includes:

1.      Licensing: Establish and maintain current License(s) as required to conduct the business of title insurance and settlement services

2.      Escrow Trust Accounting: Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation.

3.      Protecting NPI: Adopt and maintain a written privacy and information security program to protect Non-public Personal Information as required by local, state and federal law.

4.      Settlement Processes: Adopt standard real estate settlement procedures and policies that help ensure compliance with Federal and State Consumer Financial Laws as applicable to the Settlement process.

5.      Policy Production: Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance.

6.       Insurance Coverage: Maintain appropriate professional liability insurance and fidelity coverage.

7.      Consumer Complaints: Adopt and maintain written procedures for resolving consumer complaints.

For more information on ALTA’s Best Practices Framework and why it is important to do business with a company that implements these standards, visit www.alta.org/best-practices

Homestead Exemptions and What You Need to Know

What Are Exemptions?

Exemptions are a form of tax relief that can reduce the taxable value of your property. Here are 4 things you should know about them:

1. There are several kinds of exemptions that you might qualify for. They are:

  • Homestead Exemption
  • Disabled Individual Exemption
  • Agricultural Land Exemption
  • Disabled Veteran Exemption
  • Over 65 Exemption

2. In order to qualify for a residential homestead exemption, you must be occupying the property as your homestead on January 1st of the tax year in which the exemption is granted. Your application must be filed no later than April 30th to receive the tax benefit for this year.

3. It is important to note that when you apply for exemptions, you need to be sure that you have a Texas Driver’s License or Texas ID card and the address on it matches the address of the property on the application, otherwise the Chief Appraiser is prohibited from approving exemptions.

4. It is your responsibility as the homeowner to apply for exemptions. You can do this free and easily on your county’s central appraisal district (CAD) website. If the Central Appraisal District sends you correspondences regarding your exemptions, be sure to respond timely, but do not be fooled by imposters trying to get your money by filing on your behalf.

For contact information to your local central appraisal district, click here

*Republic Title of Texas, Inc. makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions.