Earnest
money is good faith money from the buyer. Which is most commonly delivered with
the offer or not long after signed contract to purchase.
As
we stated its good faith to show the seller you are serious about purchasing
the property. If you, as the buyer adhere to the terms and deadlines of the
contract it will show up as a credit at closing.
Earnest
money can be refundable back to a buyer under agreed upon contingencies like
finance, appraisal or even unclear CL100 pest letter.
VS
A
Due Diligence TERMINATION Fee is very different than earnest money.
In
SC, the termination fee amount is negotiated between the seller and buyer when
negotiating a purchase contract on a property. It’s non-refundable.
Here are 3 important items all buyers and even
sellers need to understand.
#1
The termination fee amount is the money that
is tied to the Due Diligence period which is an
agreed upon time the buyer can do their “due diligence” on the property.
Example Due Diligence items are: home
inspections, researching zoning, reviewing Covenants, Conditions and Restrictions,
measuring sq. ft. or room sizes or anything of importance to the buyer. [This is
not designed for other contingencies like subject to financing or property
appraising for purchase price].
#2
When should the termination fee be delivered
or paid?
The
termination fee is only owed if the Buyer chooses to terminate the contract during
the Due Diligence period.
In
South Carolina a termination fee should not be prepaid or included with the
offer. We understand other states proceed differently but this is how it is in
SC at this time.
This
fee is only paid upon Buyer’s termination, it is paid directly to the seller along
with a signed termination notice and needs be delivered within the due
diligence period.
#3
Buyers know your comfort level and risk tolerance.
Determine
the amount of money you are willing to risk if you decide it’s not the home for
you and you do not wish to purchase the property.
As
a buyer you may ask why should I agree to any amount termination fee.
Here
are a couple examples why:
Your
offer will stand out when a seller is reviewing offers.
Sellers
look for offers that reflect buyers who are most serious, committed and capable
of buying their property.
Termination
fee often shows commitment to a seller.
Buyers,
if you are terminating under appraisal, financing, or CL-100 contingencies set
forth in the contract and not under their Due Diligence termination rights a
termination fee is not owed to the seller.
Looking
for more guidance on your next real estate transaction? It’s a BIG decision, we
know. We’re here to help!
Brandi
Cook and Vikki Crossland
Meybohm
Real Estate
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