EARNEST MONEY

WHY?

Earnest money is a way to ensure that your offer is taken seriously and that sellers aren’t bombarded with outrageous offers that won’t come to fruition. Without these deposits, homebuyers could make offers on a few different homes and then choose the home with the best deal at the end. Earnest money protects both sides of the transaction and helps guarantee a smooth ride to closing.

WHEN?

Aim to complete the deposit as soon as possible after your offer is accepted and the purchase agreement is signed. The earnest money deposit will typically be held in an escrow account by the listing broker until closing.

HOW MUCH?

According to the National Association of REALTORS , a typical earnest money deposit is between 1-2% of the home’s total price. In a low inventory market, buyers may increase their earnest money in an attempt to outshine other offers. However, every home and homebuyer are different, so it’s important to work with your realtor for their insight on how much earnest money to offer.

When making an offer on a home, you typically submit an earnest money deposit. This deposit shows the seller that you are committed to purchasing their property. In most cases, this deposit is held in escrow until the date of closing and is then applied to your closing costs or down payment.

WILL I GET MY EARNEST MONEY BACK?

If the sale is successful, the earnest money deposit is generally applied to the closing costs of the home or the down payment. However, earnest money deposits - like all deposits - do carry some risk if you don’t meet the original terms of the offer. When you submit your offer, your realtor will advise you of the necessary contingencies to include in the terms. Then, if the home purchase fails due to a failed contingency, your earnest money deposit will be returned.

Co On Contingencies

Protects the buyer if the home’s appraised value comes in below the purchase offer

Protects the buyer if an impartial inspector reveals unsatisfactory housing conditions

Protects the buyer if they are unable to find sufficient financing to purchase the home

Sale

Protects the buyer if they are unable to sell their home before the closing date

If the transaction is unsuccessful for reasons not covered by a contingency, such as the buyer decides to buy a different home, the seller is entitled to keep the earnest money deposit.