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What is an Earnest Money Agreement?
An Earnest Money Agreement is a commonly accepted first step for property sales or rentals. It helps show that the buyer or renter is making a serious offer and often serves as a kind of down payment when the sale actually goes through. An Earnest Money Agreement (or Earnest Money Deposit) memorializes the amount of money in question and helps keep both parties honest until the actual purchase is made and the deed is transferred.
When to use an Earnest Money Agreement:
- You want to make a serious offer on real property.
- You have agreed to sell real estate to a buyer but the details aren't yet finalized.
Sample Earnest Money Agreement
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EARNEST MONEY AGREEMENT
I. OVERVIEW
II. RECITALS
WHEREAS, the Seller Landlord is in the process of selling renting the property located at , , (hereinafter referred to as "the Property"); and described hereto attached as Exhibit A (hereinafter referred to as "the Property"); and
THEREFORE, in consideration of the premises and mutual covenants herein, the parties hereto agree as follows:
III. TERMS
EARNEST MONEY. Upon mutual execution, the parties shall deposit a signed copy of this agreement and Buyer Tenant will immediately deposit the sum of , as Earnest Money, in the form of (hereinafter the "Earnest Money") with , , , . The earnest money shall only be deposited after Landlord and Tenant Buyer and Seller have signed this agreement. This earnest money will become part of the purchase price of the Property and will be applied to any applicable down payments and closing costs owed by the Buyer. This earnest money will be applied to paying down the total rental price owed by the Tenant.
ENTIRE AGREEMENT. All understandings and agreements previously existing between the parties, if any, are merged into this Agreement, which alone fully and completely expresses their agreement. Neither party will rely upon any statement or representation made by the other not embodied herein. This Agreement may be modified only by a written amendment by all parties.
SEVERABILITY. If a court holds any provision of this Agreement to be illegal, invalid or unenforceable, the remaining provisions shall remain in full force and effect and the parties will amend this Agreement to give effect to the stricken clause to the maximum extent possible.
SIGNATORIES. This Agreement shall be signed by and . on behalf of by , , by and on behalf of by , , by and shall be effective as of the date first above written.
[SIGNATURE PAGE FOLLOWS]
TENANT:
| By: ___________________________________ | Date: __________________ |
LANDLORD:
| By: ___________________________________ | Date: __________________ |
BUYER:
| By: | Date: |
SELLER:
| By: | Date: |
EXHIBIT A
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Important Details
The neutral third-party or the escrow company that will hold the earnest money deposit may require additional documents and items of information. A few examples of potential items that the escrow company may need include the following: the existing sales agreement or lease agreement (if applicable), list of any personal property as part of the sale or rental, and the anticipated closing dates and possible extensions.
