The real estate transactions remains a contradiction of sorts, relying heavily on technology to becoming increasingly digital while still falling back on the paper-based check for earnest money. However, that all may be set to change.
Owatonna, Minn.-based Berkshire Hathaway HomeServices Advantage Real Estate is offering TrustFunds, an online service that may change the way the earnest money process is handled for buyers, agents and brokers alike.
“TrustFunds eliminates the need to run all over collecting, mailing and depositing earnest money when you have an accepted purchase agreement,” Lynn Leegard, president and co-founder, said in a statement “In addition, everyone involved in the transaction knows the exact status of their earnest money deposit simply by going online.”
While technology is making many aspects of the home buying process safer and more secure, the old method of a “good faith” deposit remains mostly unchanged.
Earnest money is typically between 1 percent and 2 percent of the purchase price. However, it can go as high as 10 percent or as low as a few hundred dollars, depending on the market the home is in. The earnest money deposit is common in real estate transactions and shows a buyer is committed to purchasing a particular home.
The money is generally held jointly in a trust or escrow account until the deal closes or falls apart. This money is generally held by the seller’s broker or a title company, to be used as a credit toward the down payment and closing costs.
When the transaction is finalized, it goes towards the buyer’s down payment.
The size of the earnest money deposit required in a home purchase can determine whether the buyer or seller has leverage. While a larger deposit can serve as a deterrent to uncertain buyers, smaller deposits give buyers less to lose if they do back out.
Should a deal should collapse, holding the money in escrow will prevent the buyer from cleaning out the account the check is written from.
TrustFunds could change the way this entire process works, simplifying it into a secure, web-based transaction. According to Berkshire Hathaway HomeServices Advantage Real Estate, it offers convenience, security and tracking ability.
“By continually looking for the best ways to help our clients buy or sell their property, we welcome the addition of TrustFunds to help us deliver the very latest in payment technology to the industry,” broker Darcy Ihrke explained.
Using TrustFund, a buyer can deposit earnest money any time day or night into the designated trust account without the cumbersome unsecured process of collecting, mailing handling and depositing a paper check.
The process also offers live data to all parties with updates on payment status and accurate tracking and compliance.