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In and About Real Estate


As a buyer, it’s likely that you’ve heard the term “Earnest Money Deposit,” but it’s also likely that you may not completely understand this real estate terminology.

The earnest money deposit is an important part of an accepted purchase offer on a home. It lets the Seller know that your interest in a property is sincere—or “earnest,” thus the term “Earnest Money Deposit,” or EMD.

Generally, the earnest money deposit goes toward closing costs or the down payment as part of a home purchase. The check is usually cashed and held “in escrow” until closing.

Why is Earnest Money Necessary?

An earnest money deposit can assure a seller that a buyer is serious and not just “shopping around” for a home. Effectively, the earnest money is simply paying a portion of the down payment upfront signifying good faith and a commitment to move forward in the home purchase agreement.

How Much Money is Required in the Earnest Money Deposit?

Customary deposits can vary. However, homebuyers can expect to place 1-3% of the home purchase price in escrow as their EMD. Deposits can vary on local market conditions. Occasionally, a buyer may place more money in the EMD as a means of bargaining to purchase a home.

Considering your financial situation and personal circumstance, your agent and lender can provide advice to determine the ideal amount for your EMD.

When do you Make an Earnest Money Deposit?

After your offer is accepted and you have a signed real estate purchase agreement, the contract requires that the promised money be provided to the title company, usually within three business days. The funds will be released at the close of escrow and applied to your down payment.

Does a Contingency Protect my EMD if the Deal Falls Through?

Contingency addendums can protect a buyer in the event of a failed transaction. Such contingencies inspection, loan or appraisal and protect a buyer’s EMD. For example, Buyers can also usually get their earnest money back if they find problems with the property, or if they are unable to get a loan, for example, if contingencies for inspection and loan are in place.

It’s vital to listen to the advice of your agent and trusted lender when you write a purchase offer to be sure that your hard-earned money and interests are protected.

We would be happy to answer any of your questions about the home buying process. It’s our specialty to help folks like you buy homes safely.


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