What Is Earnest Money

What Is Earnest Money

What is the definition of earnest money?

According to the Wisconsin Realtors Association, “earnest money is money paid by a buyer (held by the broker) to show the seller that the buyer is serious.” In other words, earnest money is a deposit on a home you want to buy. It is used to show the seller that you are earnest, or very serious, about buying their home. Without earnest money, a buyer could make offers on multiple homes, basically taking them off the market, until the buyer decides which one he/she likes best. A seller is able to accept an offer without earnest money, but rarely does this happen.

How much should you expect to put down?

The amount of the deposit varies. Usually $500 or $1,000 will be enough. When there is more demand for a particular home, it may be in your best interest to offer more—usually 2-3% of the offer price.

Can you get your earnest money back?

Assuming all goes well and you buy the house, the earnest money will go toward the down payment of your home and the closing costs. You may even get your earnest money back if you qualify for 100% financing. If the deal falls through after binding acceptance, you could potentially lose your earnest money deposit. To safeguard your deposit, it is wise to put in your Purchase Agreement financial, inspection, and appraisal contingencies. That way, if you find you cannot obtain proper financing, the inspection brings about defects in the property that you do not want to deal with, or the appraisal comes in too low, you have the option to back out of your offer and reclaim your earnest money deposit.

Overall, it is best to understand the earnest money terms of the Purchase Agreement before you put in your offer!

Lisa Massey Headshot
Phone: 715-846-0446
Dated: February 28th 2014
Views: 1,886
About Lisa: Rorabeck Realty Group is pleased to announce that Lisa Massey has joined us as a Buyer’s Agent. L...

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