Earnest money laws in colorado

Mike Cooke December 1, Buyer Insights. When you execute a contract to buy a home, you will offer some earnest money to the seller.

This check will be cashed within 24 to 48 hours of being provided so make sure the money is in your account when you write the check. Here are the differences: Most contracts allow you to terminate a contract if problems are encountered with inspections, appraisals, insurance, loan approvals or title examinations.

You get your earnest money back if you terminate a contact. A default only occurs when you somehow fail to live up to your obligations under the contract. Examples of defaults might include not showing up for closing or failing to diligently pursue loan approval.

You forfeit your earnest money if you default on a contract. How much earnest money should you offer to a seller?

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One to two percent of the purchase price is a typical earnest money amount depending on price range and other factors. Of course, the amount of earnest money on any particular deal is a negotiated amount and you may want to offer more or less earnest money based on your particular circumstances and based on other items contained in your offer to the seller.

For example, you might offer a lot more earnest money if you are asking for a delayed closing. When cashed, your earnest money will typically be deposited in a trust account.

These accounts are protected from creditors of the real estate company or title company. A trust account keeps your money segregated from funds that belong to the company. These situations are more risky because your money is at risk of loss if the builder has financial difficulties.

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Your earnest money typically does not earn interest while it is on deposit. For most transactions, this is satisfactory since the amount of earnest money is usually relatively small and the time from initial contract to closing is pretty short.

The holder of the earnest money, whether a real estate company, a title company or some other entity, is not obligated to decide disputes between you and a seller regarding disposition of the earnest money. If a dispute arises, the holder of the earnest money may retain such money until receiving instructions from both the seller and from you regarding such disposition.

Most brokers and title companies would hold on to your earnest money if you and the seller are in disagreement over whether the money should be returned to you or given to the seller. However, an earnest money holder could decide to distribute your earnest money to a seller without your consent. Another danger you face when you have earnest money on deposit is that it is subject to improper use and theft. The person in charge of the account might embezzle the money or simply abscond with it.

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While these risks are real, they occur very infrequently, in our experience. Most contracts end in a successful closing. Colorado Home Realty Navigation Who We Are Who We Hire Search for Homes Search All Homes View CHR Listings View CHR Open Houses Buy Sell Meet Our Team Who We Are Who We Hire Search for Homes Search All Homes View CHR Listings View CHR Open Houses Buy Sell Meet Our Team.

Read Our Blog Learn About Financing Life at CHR Contact Us Careers at CHR. Earnest Money Mike Cooke December 1, Buyer Insights.