Real Estate Terms - Earnest Money

If you are in the market to buy a house, you will be expected to make an earnest money deposit when you make an offer.  The thought of someone asking for more money when you are making one of the largest purchase of your life, can be frightening. 
Most buyers have some questions about earnest let's talk about it!

What is earnest money? 
Earnest money is a good faith deposit meant to show the seller that the buyer is serious about buying.  It is not the same thing as your down payment.  The amount of the deposit varies and can be negotiated depending on the situation.

Does the buyer get the money back?  
In most cases the earnest money deposit is applied towards the buyer's costs at closing.  If, however, the deal falls through for some reason, the buyer may not get that money back.  One reason to work with a buyer's agent is that agent will work with a buyer client to protect their earnest money deposit.

What if the buyer decides not to buy? 
Each situation is different when a deal falls apart.  If the buyer decides not to buy for a reason that is a contingency within in the timeframe specified, the buyer will probably get that money returned. Just because the buyer doesn't buy, does not mean the seller automatically gets the earnest money.  Your agent will be able to advice you in your unique situation. 

Our best advice to protect your earnest money is to stay in close communication with your agent and to pay attention to the timeframes spelled out in your Purchase and Sale contract. 

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