If you have never bought a home or condo before, you may be wondering about what realtors mean by earnest money. Simply stated, it is a “good faith” deposit to show that you are serious about wanting to buy the house or condo.
You typically pay earnest money when you sign the purchase agreement for the home, and it is applied to the purchase price at closing.
Between the payment and the closing, the funds are typically held in a special earnest money escrow account at the listing agent’s brokerage.
When you first meet with your agent, ask what is traditional in your market to offer as earnest money. Then make sure the funds you have identified for your earnest money are accessible within a 24-to-48-hour notice before you start your search home search. After all, you’ll want to be able to act quickly when you find your new dream home.
Once you find a home that you want to buy, you’ll discuss with your agent the actual amount of earnest money you should offer.
The final amount, however, will be determined by you and the seller during negotiations. With any offer – especially in situations when there are multiple offers – the amount of earnest money you offer can be used as a key negotiating tool.
Be aware of the timing of the contingencies; inspection, attorney review and mortgage. If you cancel within the timing and in accordance with contract, you should be able to get your earnest money back.
If you cancel after all the contingencies are concluded, you could end up forfeiting your earnest money.
My team and I are here to help every step of the way. If you have any questions about earnest money or the buying process, please email jackie@jackiemack.com or call 847-274-6676.