What is an Earnest Money Deposit and why does it go into Escrow?
For that matter, what is escrow?
Let's start by defining "escrow." According to Dictionary.com, escrow is a contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee on the fulfillment of some condition.
When you make an Earnest Money Deposit, you probably want that money to go to a neutral third party, to make sure it's handled properly, right? That's where escrow comes in.
What is an Earnest Money Deposit?
When you agree to purchase a home, there is typically an "earnest money deposit" included in the agreement. This is money you put into the transaction in good faith. Should you walk away from the transaction, that money could be forfeited to the sellers. "So," you ask, "how does all of this work?"
Who, What, Where, When and Why
The journey to homeownership is made up of lots of different processes and "parties." The two most fundamental parties are, of course, the buyer and the seller. That's just the start of it, though. There are also the real estate agents, loan officers, underwriters and closers - all people you'll meet during the homebuying journey (although not necessarily in that order). A lesser known party is a third party - or what the industry sometimes refers to as an "escrow" officer. This can be an attorney, title company, etc. Each state has their own structure of how real estate transactions are settled. An escrow officer serves as a neutral third party when the homebuying process has actually reached the point of money changing hands.
Through an escrow officer - or the entity that serves this function - the home buyer makes an earnest payment that goes toward the purchase of the home. It's called "earnest" because it's an indication that the person buying the home is genuinely interested in buying a house that's for sale and is willing to part with something of value - cash - as a result. When the real estate transaction goes through successfully, the earnest money is generally counted toward the purchase of the home.
You may ask why that money doesn't go straight to the previous owner of the home. The main reason is that there are usually more things that have to happen before the deal is finalized. By holding the money in escrow - a limbo, of sorts - it provides both the seller and buyer with certain protections and assurances that the money will eventually change hands, but only after various terms and conditions are met, those which are generally mutually agreed upon.
In short, escrow officers - who could be an attorney or representative of a title company - serve as failsafes to assure that the actual purchase of the home goes as planned and that all sides are satisfied by the terms of the sales agreement. Alternatively, the money that's being held may return to you if the deal falls through because of the seller - like if the seller suddenly has a change of heart.
How much is an earnest money deposit?
That depends on you. The size of the earnest money deposit is part of the negotiation between the buyer and seller. The contract that's written up, often referred to as the "sales agreement," "purchase agreement" and "agreement of sale," details the terms of the earnest money deposit and how it may be drawn on, distributed or affected by unforseen events. It's a good idea to walk through the contract with your real estate agent and understand the ways your earnest money deposit could be affected.
See? Now you can swing these terms around with the best of them. Makes the whole process a little less intimidating, doesn't it? You've got this. And if you have questions, ask your favorite RMS loan officer.
4 smart ways to eliminate unwanted stuff
Stuff occupies our lives, much of it kept in our homes. In fact, according to estimates from the Los Angeles Times, there are over 300,000 items in the average U.S. household - enough to give organizing guru Marie Kondo a migraine.
Over time, household items that were once all the rage become out of date. Children grow older, wear and tear takes its toll and the rapid pace of technological innovation renders the state of the art to obsolete status seemingly overnight.
Big or small, stuff takes up space, which comes at a premium when you're looking to declutter and organize. So, what do you do with it all? Should you sell it online or in a yard sale? If it's technological in nature, how do you get rid of it responsibly?
Here are a few ideas that can help you resolve your stuff struggles.
1. Take advantage of social media
On Facebook and Twitter alone, there are over 1 billion active users, according to company estimates. That's an enormous base of potential customers to sell the items you no longer want or need.
As noted by NBC news, Facebook Marketplace is a fairly recent phenomenon that the social media giant developed in 2016, which enables people to locate and/or sell used items in their area. You can use this online avenue to sell or simply to inform people nearby that you're giving away X, Y or Z.
2. Consider donating
People are always in need of things, be it clothing, computer supplies, video games or lightly used furniture. Speak to friends, co-workers or relatives about any consignment shops in your area.
You can contact them and find out what they accept and what to check for to ensure the items are fully functional. You can even donate your car, which you may be able to claim as a tax deduction in April.
3. Re-gift unwanted presents
Just as everyone has stuff, everyone has received a gift they really don't want. In fact, according to a 2017 poll from Pureprofile, the average adult receives one gift during the holidays that he or she didn't want, retailing for an average of around $50.
You may want to consider re-gifting these items. However, courtesy and manners experts warn that it's best to do this when the original items come from certain people more than others, such as co-workers. Also, ensure that the clothing, appliances or gadgets you're re-gifting are unused.
4. Reach out to suppliers before disposing of electronics
The time between the newest and current model for a smartphone, tablet or gaming system seems to be getting shorter and shorter. And as such, people are updating more frequently as well. You can't merely throw these gadgets in the trash, however, as they can wind up in landfills, harming the environment.
Get in touch with whatever vendor from which you bought the device. There's a good chance it will either buy it back from you or take it off your hands at no cost; they'll make sure it's disposed of properly. You can even use a service like Gazelle to trade in that older iPhone, iPad, or Android and get some cash in return.
A simple test can save lives
The National Fire Protection association reports 70% of smoke alarms that did not work during a fire had missing or dead batteries. Have you tested yours recently?
It's a good idea to get in the habit of changing the batteries in your Smoke and Carbon Monoxide detectors when you change your clocks for Daylight Saving time. As a rule of thumb, it’s important to change your detector batteries yearly, test your detectors monthly and replace the entire alarm every ten years. Take some time this month to check that your detectors are installed correctly to keep yourself and your family safe.
Smoke and Carbon Monoxide Detector Safety Checklist:
- Make sure there are smoke and carbon monoxide alarms in EVERY sleeping room in the house, every hallway and every additional level of your home including the basement.
- The smoke alarm in the basement should be placed on the ceiling at the bottom of the stairs that lead to the next level.
- Smoke alarms that are mounted on the wall should be 4” from the ceiling. Smoke alarms that are mounted on the ceiling should be mounted 4” from the wall.
- Avoid putting your Smoke alarms within 10 feet of cooking appliances to avoid false alarms.
- Carbon Monoxide Detectors should ideally be at knee level, but they can be installed at chest level if you have children. Make sure Carbon Monoxide detectors are not blocked by curtains or furniture.
- Never paint over your alarms or put any sort of decal over them. This can affect the ability of the alarm to work properly.
These steps may seem like a pain, but it's a little bit of effort that can save lives. Make the time and be safe!
5 ways to accomplish your financial goals in 2019
Just about everyone sets resolutions after January 1. A recent Better Sleep Council poll found nearly 90 percent of Americans consider making new personal goals when the year begins anew.
The resolutions people hope to achieve are as numerous as the stars in the sky — and many of them relate to money. The BSC survey found spending less and saving more was the fourth-most popular one in 2018.
More important than setting resolutions is actually achieving them. That's easier said than done — as anyone who's tried knows. Now that a little time has passed, some of those goals may have been set on back burners by now. Here are five steps that can help you get new inspiration and cross the financial wellness finish line.
1. Write down the goal
Goals are like problems: You have to define them in order to go about reaching or solving them. As recommended by the American Institute of CPAs, ask yourself "What do I want?" when it comes to finances. Are you looking to save more money? Get out of debt? Improve your credit? Be as specific as possible.
2. Keep track of your spending
Here's an eye-opening stat: Nearly 70 percent of U.S. gross domestic product derives from consumer spending. You can understand why. Everyone buys to improve their lives, whether it's basic necessities or wants, like the latest smartphone or tablet.
It's the ongoing expenses that really add up. Whatever you buy or spend on a daily, weekly or annual basis, jot it down. Alternatively, consider downloading a mobile app. There are literally dozens of free and pay-for apps that can help you identify what your money is going toward and how you can go about curbing spending if anything seems disproportionate.
3. Take control of your credit
If you've ever borrowed money, you have a credit score, which is a barometer of your money management habits. Generally speaking, the higher your credit score, the better off you'll be in terms of approval and interest rates for loans.
If you're not checking your score at least every few months, get into that habit. Your score will improve by paying down debt, keeping balances low and consistently meeting bill deadlines.
4. Budget, budget, budget
The ideal is never having to worry about money. A great way to achieve this aim is through budgeting. Making a budget requires running the numbers. Whether it's for groceries, dining out or spending for your kids' extracurricular activities, set a limit for each category and commit to not going over it. The money saved adds up rather quickly.
5. Outline a deadline
Deadlines for accomplishing goals can be tricky because you don't want to set up one too soon, or late. In other words, you want it to be achievable, but not in a time period that's unrealistic.
Talk to a financial advisor about setting up a deadline that is challenging enough for it to require accountability and discipline. Mobile apps may offer suggestions on the ideal time line.
Here's to 2019 being the year your money goals become financial feats!
4 expert curb appeal tips for home sellers
So you're thinking about selling your house. Well, you picked a great time to put it up for sale, as inventory remains quite low nationwide.
As of early 2019, there were roughly 1.74 million properties available for purchase, according to the National Association of Realtors. That is better than where things were at this point in 2018 (1.67 million). Historically speaking, that's the textbook definition of a seller's market.
In short, when you include your house among online listings, it will almost surely receive notice from those eager to buy. With that said, though, placing a "for sale" sign on your front yard and hoping for the best won't cut it. You're going to want to add some good old-fashioned curb appeal to wow would-be buyers.
There's no need to reinvent the wheel to give your place some added panache. Here are a few of the most popular curb appeal ideas you might want to consider:
1. Beautify with colorful plants
Nothing captures the attention quite like colorful plants do. Speaking to HGTV, landscape designer Sheri Silver noted that window boxes, front beds and potted plants provide an "instant lift" to your home's look, so be sure to include them when posting pictures.
2. Change the door knobs
Little things can make a big difference. Chief among them are the door knobs. As noted by DIY Network, while they may seem somewhat insignificant, door knobs add ready-made flare to the front and back doors, which the eyes naturally gravitate to when scanning listings. Get some feedback from your design-enthusiast friends so you find the best match for your house's architecture. Adding color to the front door - like a bold red - can help make the knobs more of a focal point.
3. Seek symmetry
Whether it's matching plants to flank your house's entrance or lantern-style sconces positioned similarly, symmetry is naturally pleasing to the eye, according to Better Homes & Gardens. Whatever style, item or installation you decide to add, look for opportunities to correspond one feature with another.
4. Clear out the gutters
When was the last time you cleaned your gutters out? Gutters collect debris and channel rainwater away from your house to reduce localized flooding. That's an important job, but a dirty - and unsightly - one if you don't maintain the gutters. Be sure to give them a good cleaning.
With a little creativity and some elbow grease, you can get your house in tip-top selling shape in no time!