Can A Seller Back Off From A Property Deal? What Happens With The Token Money?
Can A Seller Back Off From Property Deal- The following step is for the buyer to give the seller a small amount of money once the property is finalised for purchase.
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What is token money?
The sum that a buyer gives the seller as a sign of his interest in the real estate deal is known as token money. Typically, it represents between one and five percent of the entire property value. Signing a notarized document that will have some legal standing records this transaction. Until the property deal is finished, the token money is transferred to an escrow account managed by a third party.
With the contract sealed, the buyer can now begin the remaining formalities associated with purchasing a home, like obtaining a home financing and gathering registration paperwork.
But what happens if the seller decides to back out of the agreement and wants their token money back? The buyer has the following options.
Can a seller refund the token money?
If a seller chooses to back out of the agreement after receiving the token money, he may do so with a penalty (if specified in the notarized document) and refund the token money to the buyer. The transaction is terminated upon the return of the token money.
What if a buyer cancels the deal?
According to the terms of the notarized contract, the seller may retain some of the money and restore the remainder if the buyer decides to back out of the agreement. The seller may sometimes keep the full amount if the trade is terminated at the last minute or if they explicitly state that the token money will not be reimbursed. Since this is a loss rather than an expense in this instance, the buyer is not eligible to deduct this amount from taxes.
RERA laws regarding the refund of token money
- RERA states that the amount of token money is limited.
- If a purchaser wishes to back out of an agreement, the developer
Tips to Follow When Paying Token Money
Document: The evidence of token money paid to the seller should be demanded by the buyer. This contract, which can be notarized, can contain information about the property, the token value. And what happens in the event that the buyer or seller backs out of the agreement.
Witness: Hand up the token cash in front of the witness, and if at all feasible, get their signature on the paperwork so that it serves as documentation in the event that something goes wrong.
Avoid paying token money in cash: Making a payment via check or bank transfer online is a better approach to keep track of the transaction. Another recognised method of payment documentation is UPI.
Conclusion
Purchasing a home is a costly endeavour. It is usually recommended that you make an educated choice to avoid losses. Make sure the project is from a reputable developer. And complies with all laws and regulations before buying real estate from one. Before transferring the token funds, it is a good idea to review the project specifics on the RERA website.
Make sure you thoroughly investigate any resale property you are considering. You can proceed to give the token money after having the paperwork verified by a lawyer.
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