Here’s a detailed list of possible questions about the Increase Deposit Addendum, along with explanations for each:
- What is the purpose of the Increase Deposit Addendum?
It formalizes the buyer’s agreement to increase their Earnest Money Deposit (EMD) by a specific amount and date, ensuring the terms are clear and binding under the purchase contract.
- When is an increase deposit typically required?
Often triggered after certain contingencies are removed—such as inspection or loan approval—to show additional good faith and commitment from the buyer.
- How does this addendum affect the total deposit amount in escrow?
It raises the deposit already in escrow, potentially increasing the buyer’s financial risk if they default but also strengthening the offer in competitive situations.
- Is the increase deposit refundable?
Refundability depends on whether contingencies remain in place. If all contingencies are removed, the additional deposit may be at risk if the buyer cancels without legal justification.
- How is the increased deposit paid?
The addendum should specify whether payment is by wire, check, or other method, and it must be deposited with escrow by the agreed date.
- Does the seller have to agree to the increase deposit terms?
Yes. Both parties must sign the addendum for it to be valid and enforceable.
- What happens if the buyer fails to deliver the increased deposit on time?
Failure to deliver by the specified deadline could constitute a breach of contract, potentially allowing the seller to issue a Notice to Perform or cancel the agreement.
- Is the increase deposit tied to contingency removal?
In many cases, the addendum is linked to the removal of contingencies (such as loan, appraisal, or inspection) as an additional assurance to the seller.
- Does the addendum change the original purchase agreement terms?
It supplements the original agreement by modifying the deposit terms but does not alter other provisions unless specifically stated.
- Can the increase deposit be split into multiple payments?
Yes, but this must be clearly written into the addendum with exact amounts and due dates.
- Does the increased deposit count toward the purchase price?
Yes. It’s part of the buyer’s total funds to close and will be credited to them at settlement.
- Is there a legal requirement to notify escrow of the increase deposit?
Yes. Once signed, the addendum should be promptly sent to the escrow holder so they can track and confirm receipt of the additional funds.
Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.
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