How Loan Contingencies Protect Earnest Money Deposits
One of the biggest questions that buyers of Wilmington real estate have is centered on losing their earnest money deposit: “If something goes wrong in this transaction and my loan application is rejected for some reason, what can I do to ensure I’ll get my deposit back?”
As a local Realtor specializing in Wilmington real estate, I am often asked if there is anything I can do to help ensure that earnest money deposits are protected. An effective strategy for protecting buyers from forfeiting their earnest money is to add a loan contingency.
A loan contingency can provide the buyer with valuable insurance, ensuring that they can avoid having to cough up their earnest money if something goes wrong and the loan application is not given the OK within 21 days of the acceptance of the offer. After the removal of the contingency, the buyer will have to either close the transaction or lose their earnest money, as it is with any real estate transaction.
Understanding that the majority of earnest money deposits come in at approximately $1000 and they can spiral upwards from there, to around three percent of the sale price or higher, it is not surprising that many buyers feel anxious about losing their deposit if something goes wrong with the deal.
All of the additional paperwork and regulations that were recently imposed on mortgage brokers in response to the financial crises only strengthens the argument in favor of adding a loan contingency. It is worthwhile to note that the average loan file now contains around 500 pages. The sheer number of pages increases the likelihood that a mortgage broker could miss one or make a mistake. Erroneous information or a missing section could easily result in the loan not getting approved.
Unless the issue with the file is accurately identified and corrected, the deal could potentially fall apart and the buyer could lose their earnest money deposit. To find out more about how to protect your interests when negotiating for a Wilmington, North Carolina home, call Fritts Causby at 858-692-5120 or email email@example.com.