The buyer's earnest money deposit is applied at settlement and reduces the remaining cash the buyer must bring to close. How is that amount characterized on the buyer's side of the settlement statement?
Correct Answer
B) Credit to the buyer
An entry that reduces the cash a party must bring to closing, or increases the cash that party receives, is a credit to that party. Earnest money the buyer already placed in escrow is applied against the purchase price at settlement, so it appears as a credit to the buyer while the seller is credited the full contract price. A debit is the opposite entry: a charge that raises the cash the buyer must produce.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
For a deed to be valid, it must contain several essential elements including a competent grantor, identifiable grantee, consideration, legal description, granting clause, signature of the grantor, and delivery and acceptance.
Escrow is an arrangement in which a neutral third party holds documents, funds, or other items on behalf of the buyer and seller until all conditions of the transaction are met.
More Transfer Of Property Questions
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- → Kevin buys a home in Oakland and takes a CLTA standard coverage owner's policy at closing. Eight months later a contractor who had finished work for the prior owner before the sale records a mechanic's lien against the property. Nothing about that work or the contractor's claim appeared in the public record on the date Kevin's policy was issued. How is Kevin's claim under his policy most likely to be treated?
- → Owner A received a deed to a California property in January 2024 and recorded it that same month. In March 2024 the same grantor deeded the property to Owner B, who paid fair market value, searched no records, and recorded immediately. Under California's race-notice recording statute, which owner prevails?
- → Under California law, what is the consequence when a property buyer fails to file the Preliminary Change of Ownership Report (PCOR) at the time the deed is recorded?
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