58.7k views
3 votes
A buyer and seller have entered into a contract for sale of a duplex. the buter defaults on the contract and the seller claims the escrow deposit per contractual agreement. What term applies to this situation?

User Rbellamy
by
5.0k points

1 Answer

3 votes

Answer:

The answer is: Earnest money deposit (EMD)

Step-by-step explanation:

An EMD or a good faith deposit is done in a real estate operation. Usually when the buyer doesn´t have all the money to buy the property they make a EMD when signing a sales contract. The EMD gives the buyer some time to get a loan, conduct the title search, a property appraisal and all the inspections necessary before closing the deal. The buyer gets his money back in case something goes wrong with the sell that isn´t his responsibility, i.e. the house has severe damage that was unnoticed until a further inspection was made. But when the sell isn´t carried out due to issues with the buyer, i.e. he couldn´t get his loan approved in time, then the buyer gets to keep the EMD. The contingencies must be stipulated in the contract, ether in favor of the buyer or the seller to establish in which cases a party can claim the EMD.

User Lucas Huang
by
5.2k points