What is Earnest Money?

Earnest money (also known as "earnest money deposit") shows a seller you're serious about making the purchase.

Typically when an offer to purchase a house is made, you, as the buyer, will also pay an earnest money deposit.  This deposit shows the seller that you are serious about the offer to purchase the property. 

The amount of earnest money deposit varies based on the type of property being purchased and local market conditions, and could be a percentage of the purchase price or a flat amount.  As your real estate professional, we can help you determine the appropriate amount to pay as an earnest money deposit.

The sales contract will dictate who holds the earnest money.  Usually the seller's real estate agent will deposit the earnest money into a trust or escrow account until closing.  At closing, the earnest money is applied toward the purchase price of the home.

In the event the sale does not close, the sales agreement generally spells out the conditions under which you would be returned, or forfeit the earnest money.  Generally if the seller meets all the terms and conditions of the contract and you, the buyer decide that you no longer want to go through with the purchase, the seller will be entitled to keep the earnest money.  If on the other hand, the seller does not meet the terms and conditions of the contract, or simply changes his/her mind about selling, you, as the buyer, will receive a total or partial refund of the earnest money.  You would receive a partial refund if, any expenses were incurred on your behalf, therefore would be deducted from your total earnest deposit.