What Is an Earnest Agreement?
In law, "earnest" refers to something of value or a down payment or deposit, given by one party to another to bind or seal a contract. "Earnest" is a term used in civil law, in common law and between buyers and sellers in real estate transactions.
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Earnest Money Agreement
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An earnest agreement, or an earnest money agreement, is a real estate transaction that creates a process to help conclude a sale, according to the Oregon State Bar website. Once a seller and a buyer sign an earnest money agreement, they are legally bound to sell and purchase the property in question, in accordance with the terms set forth in the agreement.
Terms
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Earnest money agreement terms involve the property in question, the type of deed, price and terms of payment and also designate an earnest money deposit amount to be paid by the buyer to secure the sale, according to the RealEstateABC.com.
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Understanding is Essential
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It is essential that both buyer and seller understand and agree to the terms and consequences of an earnest money agreement before any earnest money deposit is made.
Earnest Money Deposit
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According to the Oregon State Bar website, some earnest money agreements state that the buyer will lose his deposit if he backs out of the agreement. In other earnest money agreements, the seller may be allowed to force the buyer to purchase the property in question.
Choosing the Agreement Form
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An earnest money agreement prepared by a licensed real estate lawyer often is better protection for seller and buyer than a preprinted earnest money agreement form, though these are available on-line. According to the Oregon State Bar, preprinted forms do not always cover financing problems, undisclosed property issues or problems with the title or property ownership.
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