Token Money and Property Agreements Explained!

Token money is a small amount of money paid by a buyer to a seller as a sign of good faith and intent to purchase a property. It is also known as earnest money or booking amount. Token money is usually paid at the beginning of the property transaction process, even before a formal sale agreement is signed.

Importance of token money

Token money plays an important role in property transactions in India. It serves the following purposes:

• It shows the buyer’s serious interest in purchasing the property.
• It binds the seller to the transaction and prevents them from selling the property to another buyer.
• It can be used to offset the seller’s legal and other expenses incurred in the transaction.
• It can be used as a part of the down payment.

Token money agreements

A token money agreement is a legal document that records the terms and conditions of the token money payment. It is typically signed by both the buyer and seller. The agreement should include the following details:

• The amount of token money being paid.
• The date on which the token money is being paid.
• The purpose of the token money payment.
• The consequences of either party backing out of the transaction.

Forfeiture of token money

If the buyer backs out of the transaction without any valid reason, the seller is entitled to forfeit the token money. However, if the seller backs out of the transaction, they are required to return the token money to the buyer, along with interest.

Things to keep in mind when paying token money

Here are a few things to keep in mind when paying token money for a property:

• Always get a written receipt for the token money payment.
• Make sure the token money agreement is signed by both the buyer and seller.
• Clearly understand the terms and conditions of the token money agreement, especially the consequences of either party backing out of the transaction.
• Do not pay token money unless you are serious about purchasing the property.

Token money is an important part of property transactions in India. It is important to understand the purpose of token money and the terms and conditions of token money agreements before paying any money. It is also important to get a written receipt for the token money payment and to not pay any money unless you are serious about purchasing the property.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.