A good faith deposit agreement, also known as an earnest money agreement, is a contract between a buyer and seller in a real estate transaction. This agreement is designed to protect both parties and ensure that the transaction moves forward smoothly. The deposit is typically paid by the buyer and is intended to demonstrate their commitment to the purchase. In this article, we will provide a sample good faith deposit agreement and highlight key elements that should be included.
Sample Good Faith Deposit Agreement
This agreement is made between (buyer name) and (seller name) for the purchase of (property address). The buyer agrees to pay the sum of (amount) as a good faith deposit to be held in escrow by (escrow company) until the closing of the sale. The deposit will be credited toward the purchase price of the property at closing.
The buyer acknowledges that the deposit is non-refundable except under certain conditions outlined in this agreement. These conditions include:
1. If the seller breaches the terms of the purchase agreement, the deposit shall be returned to the buyer in full.
2. If the property is found to have undisclosed defects or issues that were not discovered during the inspection process, the buyer may request the deposit be returned.
3. If the buyer is unable to obtain financing for the purchase of the property, the deposit shall be returned to the buyer.
4. If the buyer terminates the purchase agreement for any reason within the designated inspection period, the deposit shall be returned to the buyer.
The seller acknowledges receipt of the deposit and agrees to hold it in escrow until the closing of the sale. The seller agrees to provide clear title to the property and to disclose any known defects or issues to the buyer.
This agreement shall be binding upon the parties and their respective heirs, successors, and assigns. Any disputes arising from this agreement shall be resolved through mediation or arbitration.
Key Elements to Include in a Good Faith Deposit Agreement
1. Amount: The amount of the deposit should be clearly stated in the agreement.
2. Escrow: The agreement should specify who will hold the deposit in escrow until closing.
3. Refundability: The circumstances under which the deposit may be refunded should be clearly outlined in the agreement.
4. Seller obligations: The seller should agree to provide clear title to the property and disclose any known defects or issues.
5. Dispute resolution: The agreement should specify how any disputes will be resolved.
In conclusion, a good faith deposit agreement is a critical component of a real estate transaction. It helps ensure that both parties are committed to the transaction and protects them from potential issues. When drafting a good faith deposit agreement, it is essential to include key elements such as the amount of the deposit, the escrow agent, refundability, seller obligations, and dispute resolution. By doing so, both parties can have peace of mind knowing that they are protected throughout the transaction.