Earnest Money: is “Good Faith” Money submitted with your offer to show a Seller how serious you are about your offer. In today’s market, one-percent of the purchase price is customary, but it can be negotiated with a Seller. Earnest Money is made payable to a Title Company and can be in the form of a personal check, money order or certified check (ask your REALTOR® about preferences for your market).  Your Earnest Money is not cashed or deposited until your offer is accepted and the contract is executed.  PERSONAL PRACTICE: I usually forward a copy of Earnest Money with an offer so the seller and his/her Agent know it’s in my possession.

If your offer is not accepted, your earnest money will be returned to you.

If you wish to rescind your offer, your earnest money may be returned to you – as long as the seller hasn’t already accepted and signed the contract. If the contract has not been executed, your earnest money is refundable.

When your offer is accepted and the contract is executed, your earnest money is delivered to the Title Company handling your closing. The Title Company will deposit your Earnest Money into an Escrow Account where it will be held until closing day. On closing day, your Earnest Money will be applied towards your Down Payment and/or Closing Costs.


Q: What happens to my earnest money if I back out of the contract before closing day?

A: It depends on the circumstances surrounding the contract termination. There are clauses in a contract that protect a buyer’s earnest money. On the other hand, if a buyer is in default, the seller could be awarded the earnest money. Consult a real estate attorney and/or your REALTOR® for advice pertaining to your transaction.

Q: What happens to my earnest money if I back out of the contract during my Option Period?

A: During an Option Period, a buyer may terminate a real estate contract for ANY reason and expect a full or partial refund of his/her earnest money. Partial refunds occur when money is due for services rendered (e.g. title fees or other invoiced services).

Q: I thought Earnest Money was only $500. Why the increase?

A: Due to the shortage in housing inventory, there’s a high demand causing a “Seller’s Market.” In a seller’s market, buyers have to compete for a new listing. Part of the competition is improving the terms of an offer to give a buyer an advantage. EXAMPLE: If a seller receives two offers – if one offer shows $500 earnest money and the other shows $5,000 earnest money, the offer with the larger financial commitment could look more promising to a seller.

Have other questions? Feel free to send them my way.




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