Earnest Money

Earnest money is a required part of most real estate transactions...but what exactly is it?

Earnest money essentially a security deposit that demonstrates to the seller that the buyer is serious about completing the home sale.

If the buyer defaults in the contract, the seller will get to keep the earnest money. However there are several steps within the transaction (Inspection, Appraisal, Loan Deadline, etc) where the buyer can legally terminate the contract and get all of their earnest money back.

It is typically 1-2% of the sale price of the home, and is due by the buyer within a few days of going under contract. The buyer will give the earnest money to their agent, and typically it is held by a title company until closing.

The good news is that as long as everything goes smoothly, the earnest money is applied to the buyer’s closing costs and down payment at closing, so it is money that the buyer gets to keep and use!