You’ve heard the term used before, but what is earnest money anyway?! The simplest way to think of earnest money is it’s a good faith deposit to the seller, that you as the buyer are going to take the necessary steps through the contract process.
Earnest money is usually held by the title company or the listing agents company. In the event that something happens throughout the contract process, maybe it’s an inspection item or your loan, your earnest money is fully refundable. You would need to terminate the contract before ANY of your objection deadlines in order for the money to be refunded back to you.
If you made it through all your dates and deadlines and a few days before closing you decide you don’t want the home, that is when the seller would keep your earnest money.
The amount of earnest money will vary depending on the price of the property. The amount is determined by the seller and the listing agent. You will need to have the earnest money ready and available the moment you start writing offers. Usually, 3 days after going under contract on a property, you will need to write (or wire) a check to the title company.
So, make sure you have the funds available!…It is both your jobs as a buyer and your buyer’s agent to make sure that while you’re moving through the process that everything feels 100% good. The goal is to not don’t get yourself into a situation where you would lose your earnest deposit.