What Is Earnest Money?

Let’s talk about earnest money! 

Earnest money is the first time in the home buying process that buyers pay money toward the seller, and it’s something a lot of first time home buyers don’t know about. So what is it?

Earnest money is like a deposit. Typically 1% of the purchase price, it is expected to be paid within 2 business days of your offer being accepted. This money is to show the seller the buyer is serious and willing to put some skin in the game. When a transaction goes according to plan, the 1% moves from the seller’s trust fund and is applied towards the buyer's closing transaction. Hence why it’s like a deposit! 

But what happens if a transaction does not go according to plan? 

One of two things can happen. The earnest money can either be returned to the buyer when a cancellation occurs, or the earnest money can be given to the seller to compensate for the time the home was off the market. 

It’s important buyers be informed and prepared so they can ensure to have the money liquid and moveable in their accounts when submitting an offer.

Have questions about the home buying process? Connect with me on my contact page!