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An earnest money deposit addendum adds terms to a purchase agreement that require the buyer to pay a deposit as a downpayment on the property. The deposit is referred to as “earnest money” and is held in escrow until all closing conditions have been met and the sale is completed. If the buyer fails to close the purchase, the earnest money will generally be released to the seller.
Release of Earnest Money
Once a purchase agreement has reached closing, the earnest money will usually be automatically contributed towards payment of the purchase price. If the agreement is canceled, a release of earnest money addendum must be added to the original contract to distribute the funds.
Sample
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EARNEST MONEY DEPOSIT ADDENDUM
1. THE PARTIES. This Release of Earnest Money Addendum (“Addendum”) made this [MM/DD/YYYY] is by and between:
Seller: [SELLER’S NAME] (“Seller”) and
Buyer: [BUYER’S NAME] (“Buyer”).
The Seller and Buyer are each referred to herein as a “Party” and, collectively, as the “Parties.”
2. ORIGINAL AGREEMENT. This Addendum is being added to the purchase agreement between the Parties, dated [MM/DD/YYYY], for the property located at [PROPERTY ADDRESS] (“Original Agreement”).
3. EARNEST MONEY. The Buyer agrees to make a payment in the amount of $[AMOUNT] as consideration by [MM/DD/YYYY] at [TIME] (“Earnest Money Deposit”). The Earnest Money Deposit shall be applied to the Purchase Price at Closing and subject to the Buyer’s ability to perform under the terms of the Original Agreement.
4. ESCROW AGENT. The Parties acknowledge that the Earnest Money Deposit for this transaction will be held in escrow by [ESCROW AGENT] (“Escrow Agent”) with a mailing address of [ESCROW AGENT ADDRESS].
5. DISPUTES. In the event of any dispute over the Earnest Money Deposit, the Parties acknowledge that the earnest money will not be released to either party by the Escrow Agent without written authorization signed by both Parties or by court order.
6. EXECUTION. This Addendum may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Authorization and release of funds will be transferred immediately after execution by the Parties.
Seller’s Signature: ___________________ Date: [MM/DD/YYYY]
Print Name: [SELLER’S NAME]
Buyer’s Signature: ___________________ Date: [MM/DD/YYYY]
Print Name: [BUYER’S NAME]