Buyer Question: What is earnest money?

by Brian Huie on 4/15/23

Earnest money is a form of “security deposit” the buyer makes as a show of good faith in the transaction.

The purchase and sale agreement will spell out how much you agree to deposit into escrow, and, the escrow officer will hold onto the funds until closing. The earnest money is disbursed at closing, with it typically going toward the buyer’s closing costs or down payment.

In our market, 5% is the maximum amount buyers can offer. When we are ready to make an offer, I will guide you in determining what amount of earnest money to offer.

If you back out of the transaction for reasons not allowable under the agreed upon contract, you may have to forfeit the earnest money, in which case it may be released to the seller. However, there are a number of potential contingencies we may elect to include in the offer to protect you from this loss. When writing up the offer, we will discuss the contingencies that would be recommended in the situation in which you are making your offer.

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