In real estate business, offer to purchase a property normally goes together with some kind of formal assurance or a deposit that is also known as 'earnest money'. This deposit or consideration is essential as it shows the eagerness and sincerity of the individual to purchase a real estate. In the instance of the prospective purchaser backing out of a deal without assigning any valid legal reason, the deposit amount or 'earnest money' is deemed to be a compensation to the seller for the failed transaction.

Here, it must be emphasized that the deposit or 'earnest money' should not be confused for a down payment or an installment towards the purchase of a property. In real estate business, a deposit is deemed to be some kind of a consideration that the property owner receives from a prospective purchaser while proffering to buy the real estate. In fact, a down payment is an extra amount that the purchaser pays the seller with a view to lessen some of the obligations mentioned in the mortgage loan agreement.

Many people often want to know what the exact amount of money that would comprise a deposit. Honestly speaking, the entire issue depends solely on the buyer and the seller as there is no standard amount or fraction of the value of a property that may be said to be a fitting deposit. In such as situation, it is obvious that while the seller would want the deposit to be a large sum, possibly even the full price of the house, the buyer would like the deposit to be as low as $20. Thus far, everything is simple and clear. However, the issue becomes a tricky subject while deciding the recipient of the deposit in the event of a default on the part of the purchaser. Normally, the provision of deposit or consideration has been formulated with a view to safeguarding the seller's interests and hence, it is very natural that the money should go to the property owner who has listed his or her real estate for sale. However, there is a third party in the transaction and he is the broker. Usually, the broker also lays claim to the deposit amount and in most cases the money is split between the seller and the broker. In fact, if the deal falls through on account of the purchaser being a defaulter, the broker is permitted to obtain half of the deposit depending on the worth of his or her fees.

According to the rules, a broker is responsible for finding a suitable purchaser who is prepared, eager and capable of buying a real estate listed from sale. And when the broker has found a prospective buyer who makes an offer to purchase the real estate, he or she has practically accomplished their responsibility as agreed between them and the seller. Thus, the broker is also eligible for a part of the deposit amount when a deal fails on account of the purchaser turning a defaulter. Moreover, the broker's claim to a part of the deposit amount cannot be overlooked, as he or she is in no way liable for the deal falling apart.

Normally, the deposit amount due to the broker is maintained in an 'escrow' or trust account by the broker denoting that the broker's resources and the purchaser's money are independent of each other. The broker receives his or her share of the deposit amount after the finalization of the real estate sale as they have been responsible for organizing the settlement of the deal between the seller and the buyer. And in the instance of any dispute over the money, it is only released from the escrow account with the joint consent of the buyer and the seller. However, in a situation where the buyer and the seller cannot arrive at a consensus over the amount, the money in the escrow account is passed on to the court till the two agree on a decision.

Here is a word of caution for the prospective real estate buyers. They should always bear in mind that their responsibilities or the seller's claims do not end with the seizure of the deposit in the instance of a transaction falling through on account of their becoming defaulters. Normally, the average kind of agreements stipulate that in the instance of becoming a defaulter, the buyer not only loses the deposit, but is also faces the threat of being sued by the seller for adequate compensation. Hence, it is advisable that while signing an agreement, the buyers should try and confine the probable claims by the seller or the broker acting on behalf of the seller only to the deposit sum.

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