The residential real estate market has been blazing hot. The median residential real estate price in North Carolina hit a record high in 2021. With more at stake in real estate transactions than ever before, there has also been a rise in real estate-related disputes. During this market, it is crucial that all parties know their rights and responsibilities. Here, our North Carolina real estate lawyers explain the key things to know about earnest money and real estate transactions in North Carolina.
What is Earnest Money in Real Estate?
Earnest money is also referred to as an earnest money deposit or simply as EMD. As defined by Investopedia, earnest money is a “deposit made to a seller that represents a buyer’s good faith to buy a home”. By making an earnest money deposit, a buyer is putting a hold on the home while they move towards the next stages of the transaction—such as the inspection and/or financing. Assuming that transaction goes forward without issues, the EMD will be applied to the buyer’s down payment.
North Carolina Law: Terms of an Earnest Money Deposit are Negotiable
The terms of an earnest money deposit are negotiated by the parties in North Carolina. It is crucial that all parties understand the specific terms when earnest money is transferred to a third-party escrow agent. Among other things, key terms that need to be negotiated include:
The Amount: As a general rule, earnest money is typically between 1 percent and 5 percent of the total residential real estate purchase price. Though, it can sometimes be lower or higher.
The Deadline for a Refund: Most often, earnest money is refundable during the due diligence period. If a potential buyer decides to terminate the contract and not go through with the purchase, they will usually receive their earnest money back if the termination is within the due diligence period.
What to Know About Disputes Over Earnest Money in North Carolina
Ideally, earnest money will not be a major issue in a real estate transaction. When things go smoothly, it can simply be applied as a credit towards the purchase price. However, the reality is that real estate transactions can sometimes go wrong. In that case, a dispute may arise over the earnest money. Under North Carolina state law (N.C. General Statute §93A-12), the escrow agent that is holding disputed earnest money must deposit funds with the Clerk of Superior Court in the appropriate county. Each party to the case is entitled to notice that this is happening. The county court will have jurisdiction over the earnest money dispute.
Call Our North Carolina Real Estate Lawyer for Immediate Help
At Plyler, Long & Corigliano, LLP, our Monroe real estate lawyers are focused on protecting the best interests of our clients. If you have any questions about residential real estate and earnest money, we can help. Get in touch with us by phone or connect with us online to arrange your completely confidential initial appointment with a lawyer. We provide real estate law services throughout Union County, including in Monroe, Indian Trail, Matthews, and Wingate.