What is an Earnest Money Deposit
What is it for and who pays it
An earnest money deposit, also known in real estate as a "good-faith" deposit shows the seller that you are serious in your offer to buy a piece of real estate.
It is not be confused with a "down payment."
Typically when a person makes an offer to purchase a property, that buyer, will also make an “earnest money” deposit.
The deposit is intended to show the seller that the buyer is serious about his offer to purchase the property offered for sale.
An example: two parties make offers to buy a piece of real estate at about the same time. The seller may
decide that the offer accompanied by the larger earnest money deposit represented the more serious offer.
The amount of earnest money deposit will vary based upon the type of property being purchased, market conditions and the expectations of the seller.
Your Realtor® will help you determine the amount of earnest money deposit to offer.
If your offer isn't accepted, the earnest money deposit will be reurned.
If your offer is accepted, the purchase contract will dictate who holds the earnest money. It is customary for the seller’s
broker to hold the money until closing in an escrow account. At closing, your earnest money will be applied against the balance due.
If the sale does not close, the purchase contract generally spells out the conditions under which you may have to forfeit
your earnest money. Generally, if the seller meets all the terms of the contract, and you do not close the sale for reasons under your control, the seller will keep the
earnest money. If, conversely, the seller doesn't meet the terms of the contract, you, as the buyer, may receive a total or partial
refund of your earnest money deposit.
Earnest money is "real money". Your real estate agent can explain the specifics of an earnest money deposit for the type of contract offer you are making.
Be sure you understand what you are committing to and what actions are required of you before you
make an "earnest money deposit."
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