Who holds the earnest money in a For-Sale-By-Owner transaction?
When a buyer enters into an agreement to purchase a home, the sales contract specifies the amount of earnest money paid and who will hold said earnest money. Should the seller be the person designated to hold the earnest money?
It is more prudent to have a real estate agent or closing attorney hold the earnest money, so that the buyer won’t have to fight to recover it if the contract falls through. If the seller holds the earnest money and decides to keep it, no matter the terms of the contract, the buyer may spend more than the earnest money trying to recover it.
Buyers considering a for-sale-by-owner property should choose an experienced closing attorney to draft or review the sales contract and hold the earnest money until the sale is complete.