Expert: Russel Ray - 5/20/2008

Question
hi-i gave an earnest check in the amt of 1000.00 to the seller of property that i am in the process of purchasing--this check was submitted to my realtor on May 15,2008 and it was cashed out of my acct on May 19,2008-by the sellers--the inspection appt is today.Is it common practice 4 an earnest check to be cashed so fast? What is the process of receiving my earnest money back if the property fails an inspection both by my own inspector and by the FHA inspector? What about ant repairs that i agree to do prior to closing? I've been told that the mandatory closing date is June 2oth with a 100 a day fee per day after this date. What if FHA isnot satisfied with any repair work that I have done? Will this end the deal and can my earnest money be returned prior to the closing date of June 20th?  Would appreciate a prompt response today--early--thank you

Answer
Hey, Vicki.

Four days to cash a check is probably right there in the middle of things. I've seen them cashed the same day, and I've seen them withheld for three or four weeks. It deepends on what else is going on. For example, in order to submit a purchase offer, there has to be earnest money. Occasionally, like if the two Realtors are very familiar with each other, they will hold the purchase offer until the earnest money is received. When it is, the check is cashed the same day. At other times, such as when there are multiple offers and you're in the backup position, the check might be held for several weeks while the first purchase offer goes through the offer/counteroffer process.

Next, know that properties don't pass or fail inspections. An inspection is simply a documentation of the condition of the property at a specific point in time. Then you or the FHA inspector decide whether you want to go forward with the purchase offer. Many times the seller will agree to repair things to help the process along. Sometimes the buyers get "buyers' remorse" and use the home inspection to opt out of the purchase contract. Sometimes the FHA inspector will require an upgrade, such as requiring an upgrade to the electric panel. If the sellers refuse, then the FHA loan company can choose not to make the loan.

You wrote, "What about ant repairs..." I'm presuming that should be "any repairs." The terms of both your purchase contract and your loan contract, as well as state laws, will determine mandatory closing dates, fees for not closing on time, satisfaction or dissatisfaction with repair work, and when your earnest money is returned if you don't go through with the contract. Usually if escrow is closed, earnest money is returned at the close of business that day. However, the seller could hold things up if he believes that you have not negotiated in good faith, or the escrow company can hold things up if there are problems, such as unpaid bills, etc.

If you need help reading through the fine print in your purchase contract or your loan contract, don't hesitate to talk with your Realtor or your Realtor's broker and your loan broker. They get paid the big bucks, so make them earn it so that you are satisfied.

Good luck.