Earnest Buyers Lay Cash on the Line When Finding a Home They Want
/ Assistant Vice President/
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With a tight housing market like today, you may need to offer earnest money to compete against other buyers.
What is earnest money?
Earnest money is essentially a security deposit you make on a home to show the seller you’re serious about buying.
According to the National Association of Realtors, earnest money is usually expected to be around 1-2% of the home price – but that can vary depending on your market.
You do get credit for the earnest money. It acts as a good faith promise to go through with the transaction and also towards your overall cash investment into the home.
The earnest money is deposited after the seller has accepted the offer to buy their home and is usually kept in an escrow account with a title company. When you close on the home, the earnest money is applied to your down payment and is reflected on the closing disclosure (also called the settlement statement).
Can you get your earnest money back?
It would be great if every real estate transaction went through without any problems, but we know that’s not always the case. Is earnest money refundable? Well, that depends on the reason you want it back.
Most real estate contracts contain certain legal verbiage and contingencies to protect the buyer. If you terminate the contract due to a contingency, you may be able to get your earnest money back. These contingencies may include (but are not limited to) the following:
- The home inspection fails
- The home appraises below the sales price
- You cannot obtain mortgage financing
- The home has title issues that cannot be resolved
It’s also possible that you would not get the earnest money back if you don’t meet the performance deadlines listed in the contract or if you simply change your mind.
Ready to buy a new home?
I’ll make sure you understand each and every part of getting a mortgage from being pre-qualified all the way handing over earnest money. Give me a call today!