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Things you need to know about Earnest Money Agreement for Immovable Property.


1. What is an Earnest Money Agreement? 

An Earnest Money Agreement is used to show that the buyer is serious about purchasing property from the seller. Under an Earnest Money Agreement the buyer pays the seller an amount of money, called “earnest money”, which is used to reserve the property to the buyer for a certain period of time.  

During this period the seller cannot sell the property to any other person except the buyer.  The buyer and seller then engage in good faith discussions to finalize the terms of sale.  Once finalized the buyer purchases the property from the seller with the earnest money being credited towards the purchase price. 


2. When do you need an Earnest Money Agreement?

An Earnest Money Agreement is normally used when the buyer wants to reserve certain property in preparation for the buyer purchasing the property from the seller.  The reservation prevents the seller from selling the property to any other person except the buyer. 


3. How can an Earnest Money Agreement benefit you?

An Earnest Money Agreement benefits the buyer by being able to reserve the property in his favor.  The buyer is free to finalize the terms of sale with the seller without the risk that the seller will sell the property to another person during negotiations.

On the other hand, the seller receives the benefit of earnest money under the Earnest Money Agreement.  Normally the seller keeps the earnest money if the parties are unable to finalize the terms of sale within the reservation period despite good faith negotiations.  The seller also enjoys the benefit of a buyer who is committed and serious about purchasing the property.


4. What information do you need to create an Earnest Money Agreement?

To create your Earnest Money Agreement you’ll need the following minimum information:

  1. The type of buyer (i.e. individual or business) as well as name and details (i.e. nationality and address)
  2. The type of seller (i.e. individual or business) as well as name and details (i.e. nationality and address)
  3. Brief description of the property to be purchased
  4. Other terms of the Earnest Money Agreement (i.e. the amount of earnest money, the period the property will be reserved) 

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