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What In The World Is Earnest Money Anyway
Resulting from or showing sincere and intense conviction.
A current medium of exchange in the form of coins to checks and banknotes.
Q: What is earnest money?
A: Earnest money is upfront money to show that you are a serious and capable buyer. We call it in the industry “having some skin in the game”.
Your agent will ask you to provide an earnest money check with any offer you submit. They will ask you to write the check out to the escrow company of your choice and in the amount of your choice.
If your offer is not accepted, this check will be returned to you or shredded by your agent.
If your offer is accepted (congratulations!!!) it will be delivered to the Escrow Company and deposited within 24 hours of a contract being fully signed around.
Q: How much earnest money do I need?
A: Earnest money is “in the amount of your choice”. There is no black and white answer for how much earnest money you should put up when you make an offer on your new home. As agents, we suggest at least 1% of the purchase price. Any more than that only makes your offer stronger and makes you look like a better candidate to the seller.
Q: What happens to this money after my sale is complete?
A: This earnest money check will be deposited into the escrow account and applied as a “credit to the buyer” at the time of closing.
*This earnest money will ABSOLUTELY go towards your closing cost; any taxes, commissions or down payment due at that time.
*It is in NO WAY an addition to the fees due at the time of signing for your new home.
Q: What happens if there is a problem and the contract is terminated?
A: As you read through the offer that is presented by your agent this is a great question to have in the forefront of your mind. There are a few different clauses written into the contract to protect your earnest money.
Inspection: If the property condition is not acceptable, your earnest money is protected.
Appraisal: If the value of the property is not reflected in the purchase price, your earnest money is protected.
Financing: If you for some reason cannot obtain financing through the transaction, your earnest money is protected.
Q: Is there any way my earnest money ISN’T protected?
A: The only way you as a buyer could potentially lose your earnest money is if you terminate the agreement with NO CAUSE. Then the earnest money check will be credited to the seller and the contract will be terminated. Also another great question to ask your agent before you sign any offers.
It is important to have an agent that is educated about the proper time lines for all parts of the transaction. A good agent that can communicate with you through all these timelines and make sure that you are satisfied with the property. Continuing to move forward through each step of the transaction with knowledge and confidence that it is the right home for you.
If you have any more questions about earnest money or any other part of the home buying process please feel free to contact me directly.
Tracy Balogh has always had a creative flair for finding exactly what her clients are looking for. With 30 years of experience in the antique and jewelry business, she has decided to expand her talen....