Once you've made an accepted offer on a home, you may be asked to provide earnest money to the seller as a sign of good faith that you will follow through with the sale of the home. This can cause you to have many questions about this money that you are about to hand over. Here are a few things you should know about earnest money.
Who Decides How Much Earnest Money To Provide?
It is common for the seller to ask for a specific amount of earnest money, but the amount that they can ask for is very subjective. The seller could ask for as little as $500 or $1,000, or base it off a percentage of the home's value. One thing to keep in mind is that earnest money is negotiable. If you are not comfortable providing a large amount of earnest money, simply ask the seller for less.
Earnest money may be used as a way to screen out buyers that are not serious about home buying. For example, if the seller has multiple offers to pick from and you are not willing to provide $1,000 in earnest money, then that may be a red flag for them to move on to another offer.
Can Earnest Money Be Refunded?
Many home buyers worry that they'll lose out on their earnest money if something were to happen and the deal were to fall through. However, there should be a contract in place that will dictate how that money can be refunded to you if the contract is not followed.
For example, part of the contract could state that the home will pass a home inspection and that you have the right to back out of the deal if you do not like the results. You may also have a way to get your earnest money refunded if you fail to be approved for a mortgage. Make sure you work closely with your realtor when signing the contract on the home, and to make sure that all of the necessary contingencies are in the contract that allow you to get your earnest money back.
Earnest money is typically not refunded if a buyer simply changes their money or finds another home. You may get to the very last step in the process and have cold feet and decide to back out of the sale right before closing. In this situation, the seller gets to keep your earnest money because you've essentially tied up the home for several months and the seller deserves to be compensated for their time and potential lost sales.
Contact a real estate agent for more information regarding homes for sale.
After thinking long and hard about what kind of home to buy, I began talking with a real estate agent about getting a deal that I could live with for the rest of my life. I really wanted to find a home and a deal that offered pleasant terms for me and my business, so I began focusing seriously on getting things done. It was amazing to me to see just how different various real estate deals were, and before I knew it, I was making some changes that would work for my lifestyle. Within a few months, things were a lot better. This website is all about understanding and applying real estate deals.