When the (Earnest Money) Check ISN’T in the Mail
Normally, the Buyer’s earnest money check is due as soon as the Buyer and Seller have entered into a valid Purchase Agreement.
However, I just handled a deal where the Buyer’s offer stipulated that the earnest money wasn’t due until after the Inspection Contingency had been removed — in most deals, about 10 days later.
Does the delay matter?
Not really.
But, there can be a psychological and basic financial reason Sellers prefer to get it sooner — especially if the earnest money is a large amount.
Saving 10 Days and 1¢ Interest (Maybe)
Per the standard Minnesota Inspection Addendum, the Seller is obliged to promptly return the Buyer’s earnest money if the deal cancels as a result of the inspection.
Practically, however, returning the Buyer’s earnest money can take 7-10 days.
That’s because the money must typically be retrieved from the Broker’s trust account, and for that to happen, both Buyer and Seller must first sign a Cancellation.
So, a Buyer who delays delivering an earnest money check skips the (minimal) wait to get it back if the deal goes south and, I suppose, a few cents interest (maybe).
Other Motivations
But I suspect the real reason Sellers prefer to get the Buyer’s earnest money check upfront is two-fold.
One. Psychologically, it helps cement the Buyer’s commitment to the deal.
Two. Especially if the earnest money check is large, the Seller finds out immediately if the check has cleared.
And yes, I’ve seen the Buyer’s earnest money check bounce.
That’s not necessarily fatal to a deal, but when that happens, the Buyer had better have a good explanation, and immediately (as in, wire transfer) deliver a replacement.
P.S.: Of course, if the Buyer negotiates for a delayed earnest money check, it’s incumbent upon the listing agent (representing the Seller) to remember to collect it immediately after the Inspection.