Do you happen to know the most important part of the home-buying process? If you guessed the depositing earnest money, you are correct! What is earnest money you say? The earnest money is a sum of money you put down on your home. It acts as a deposit on the property you are looking to buy.
An earnest money check is typically different from a down payment. Once the money is cashed, the title company will either deposit it in the broker’s escrow company account or a trust account. Then you will receive a receipt from your brokerage once you hand in the earnest money.
Sellers rarely accept offers from buyers without them putting in an earnest down payment. The real estate buyer can make many offers on many homes, deciding which one they like best without the requirement of earnest money. If everything goes well for the buyer and seller, the earnest money can go towards the down payment and closing cost. Also in some circumstances, if the buyer doesn’t like something about the home or doesn’t want to output an offer on it anymore, they can essentially get their earnest money back.
How much money should you put down for the earnest?
The deposit of your earnest money all depends on the market, state policies, and what your real estate agent recommends. On average, you can expect to hand over 1% to 2% of the total home purchase. With the market as it is today, listing agents will require only 1%or less for the earnest money deposit. If you are looking to give the seller a larger deposit, then you are most likely to win that bid. If that is the case then you may end up having to sign some papers for your mortgage lender or your bank to verify for a large deposit of money.
When to make an earnest money deposit and who holds it?
Once your offer has been accepted and you have signed the agreement then that lets the title company you have given them your deposit. Never give your deposit to your seller because it could be very difficult to receive that money back if anything goes wrong.
Then after the signing of your deposit, your funds are held in an escrow account until the final stages of your home. After the process is complete your escrow will be released and applied to your down payment.
Will you ever receive your earnest money deposit back?
Whoever holds your deposit determines if you should get that money back or not. Before signing make sure you understand the purchase agreement covers how the earnest money refund is handled. Most buyers can usually get their money back if they find problems with the home.
