Real Estate Term Tuesday: Earnest Money

What is earnest money?

  • Earnest money is similar to a security deposit- it shows the sellers that you are serious about purchasing their property. Without earnest money, you could write offers on multiple properties at the same time.

How much earnest money should I put down in my offer?

  • The amount of earnest money varies but is usually 1%-2% of the purchase price. 

When do I pay earnest money and who do I give it to?

  • Earnest money is delivered to either the title company or the listing broker (varies by brokerage) and is often due within a week of receiving an accepted offer.

What happens to my earnest money?

  • If the offer is rejected: no earnest money is sent.
  • If the offer is accepted and there are no hiccups: your earnest money goes towards your down payment or closing costs.
  • If the offer is accepted but you change your mind after 2 weeks and don’t want to buy the house anymore: you lose your earnest money
  • If the offer is accepted but a defect is found sometime between accepted offer and closing: you will most likely be able to get your earnest money back. As your Realtor about your offer! 

Communicate and Confirm

  • Before submitting an offer, discuss what will happen to your earnest money with your Realtor! After discussing, check that the offer clearly states where your earnest money will be held and in what situations you will get it back if something happens to the offer.

 

See  you next Tuesday!

Lizzy Parker: 608-422-2824

Spencer Schumacher: 608-358-7622