Whether you’re buying or selling a home, Earnest money is part of the equation. It’s a payment by the buyer deposited to show the buyer that you are prepared to make a legitimate offer, and want to buy the home. It goes toward the down payment on the home after the sale is completed.
As a seller, you’re obviously looking for serious buyers, so getting an earnest money deposit is important to help determine who really wants to buy your home.
As a buyer, you are demonstrating how important this home is to you by the deposit. Earnest money is usually 1-2% of the price of the home, but the market determines the amount. In a hot market, like what we are in right now, the seller can demand a higher Earnest money payment since they will get multiple competing offers, or in the case of a home that has sat on the market for a while, they can lower it to entice buyers.
The money is generally held by either the real estate broker or title company and then put into an escrow account. Once the home purchase is finalized, that money is then disbursed from escrow toward the down payment.
Make sure that the title company or broker is legitimate before writing any checks, though! Earnest money has gone missing before. Your realtor or mortgage company will help steer you in the right direction.
The buyer can still back out of the deal, and can conceivably still get that Earnest money back. There will usually be some sort of cancellation fee that you will have to eat, and the holder of the escrow account will make the determination on how much money the buyer gets back. If the buyer backs out without a reasonable cause, the deposit is not likely coming back. Reading the agreement before sending a check can help you determine your rights in this case.
Hopefully, you learned a bit about Earnest money and how it can affect a home sale. To buy or sell your home, contact The Rick and Tracy Ellis Team, now with Keller Williams Realty in Chesterfield, by calling us at (636) 534-8287 or emailing Tracy at email@example.com or Rick at firstname.lastname@example.org today. We look forward to helping you buy or sell your home! Visit www.tracyellis.com today to learn more about St. Louis Real Estate!