What is Earnest Money?
Earnest money is a deposit on the house you want to buy. It’s used to show sellers that you are earnest, or very serious, about buying their home.
Without earnest money, you could simply make offers on many homes, essentially taking them off the market until you decide which one you liked best. Sellers rarely will accept offers without deposits.
Assuming all goes well and you buy the house, the earnest money goes toward the down payment and closing costs. In many circumstances you can get most of your deposit back if you discover something that you don’t like about the home.
How much should you expect to put down for a deposit?
The amount of the deposit varies. When there is more demand for the house, the seller will require — usually 2%to 3% of the offer.
Can you get your earnest money deposit back?
If the deal falls through later, a small cancellation fee will usually be taken out of the deposit, but the remainder will remain in escrow. Whoever is holding the money will determine whether the buyer should get the money back under the terms of the purchase agreement.
Be sure the purchase agreement covers how a refund is to be handled. Eager buyers sometimes give up their rights. But keep in mind that even if you are pre-approved for a mortgage loan, you can be declined when you apply for one. Standard contracts will allow you to receive the earnest money deposit in this case.
In addition, if you find problems with the property, you usually can get your money back.
Tip:Once you sign the contract, make sure to have the inspection, survey, and appraisalperformed quickly, or you can lose your earnest money.
Resources:
BIGGER POCKETS
REALTOR.COM
For more information on this and your residential curiosities contact your CLAYSTAPP+CO Realtor
CLAY STAPP+CO
1933 Cedar Springs Rd. Dallas, TX 75201
214-855-0777
Helpful facts.