The earnest money deposit is an important part of the real estate transaction, and here’s what you need to know about it.
Buying a home? Click here to search all homes for sale.
Selling your home? Click here to learn more about our home selling system.
Today I’ll cover the topic of earnest money deposits by answering a few of the most common questions regarding them.
First, what is an earnest money deposit?
An earnest money deposit is a good-faith deposit that a buyer puts down on a home to show the seller that they’re a serious, committed buyer.
How much do you put down in an earnest money deposit?
This amount is usually negotiated between the buyer and seller, so it can vary. As a general rule of thumb, though, it will usually be between 1% and 2% of the purchase price. The deposit itself goes toward the down payment of the home, and it’s generally held by the title company that’s performing the closing, although it can also be held by the brokerage.
The date that the deposit is delivered is also negotiated between the buyer and seller. In some cases, it will accompany the offer, but the standard real estate contract requires it to be due within three days of the executed contract, or the time that both the buyer and seller sign the contract.
“The earnest money deposit will usually be between 1% and 2% of the purchase price.”
Can you get your earnest money deposit back if something goes wrong?
It depends on the situation and how your contract is written. There will likely be a couple contingencies with the purchase: the inspection contingency and the financing contingency. If something goes wrong during the home inspection or you find something you don’t like, you have the right to take your full earnest money deposit back as long as you do so within the time period originally agreed upon.
It’s important that you work with an agent who can walk you through all the contingencies and let you know where you’re at in the process so you know that your earnest money deposit is never at risk.
If you have any questions about this topic or you have any other real estate needs, don’t hesitate to give me a call or send me an email. I’d be happy to help you.
