Earnest Money Deposits

Dated: 07/17/2014

Views: 581

Earnest money is a part of every residential real estate transaction regardless of what type of home you're buying. Earnest money is a deposit made by a buyer shortly after an offer is accepted by a seller. The deposit is to be held by the sellers agent or a title company chosen by the seller until the real estate transaction has been completed. 

There are a few important things you should know about earnest money deposits when buying a home. First, the deposit must be non-borrowed funds meaning they must be traceable from your personal bank account. Sometimes you can simply write a personal check for the deposit, but in some cases you may need to provide a certified check or even a wire transfer. Second, the deposit is typically 1-2% of the purchase price of the home. For example, a $200,000 home should require an earnest money deposit of $2,000-$4,000. It is important to keep in mind that sellers want the earnest money deposits to be as high as possible. The higher the deposit the more likely the buyers will not back out of the deal or risk loosing the deposit. 
The third thing you must know about earnest money deposits is that as a buyer you can be forced to forfeit the deposit if you do not hold up your end of the contract. Contracts will be written with deadlines to ensure that the process moves along in a timely fashion. Some of the deadlines will be items that the sellers must complete, and others will be the buyers responsibilities. If the seller fails to meet the requirements of the contract the earnest money shall be returned to the buyer. However, if the buyer fails on a part of the contract it is possible that the contract can be cancelled and the sellers will be rewarded the earnest money deposit. 
Overall, earnest money deposits can be a surprise to first time home buyers, but this guide will help to provide buyers with a better understanding of what earnest money deposits are and why they are important. 
Blog author image

Sheryll White

As a Full Time real estate agent for the past 23 years, Sheryll has helped hundreds of home owners in Colorado buy and sell their homes. Sheryll's easy going, no pressure style and her in depth knowl....

Want to Advertise on this Site?

Latest Blog Posts

A Peak Inside Chip And Joannas Farmhouse

I have to say my husband and I are big fans of the Gaines family!  Unfortunately, I have way too much eccentric decor from my self proclaimed artist days and not to mention a mish-mash of hubby

Read More

Real Estate On A Personal Level

I’m going to be a “me monster” for a moment, but I promise this info will help you out too!  I got into real estate here in Castle Rock for many reasons.  The one that has

Read More

Bubbbbbbbblesss

All the "bubble" talk reminds me of the yellow fish in Finding Nemo.  Every time that little pirate chest opens and the bubbles come out he gets so excited (hilarious)!  People get very

Read More

Building 1 Million In Net Worth By Investing In Real Estate

Words literally taken from the title of the article.  These are the kinds of ideas I'm talking about for those of you who want to make real estate investment a part of your business (making a

Read More