What is an Earnest Money Deposit…??
A Earnest Money Deposit is a financial commitment to show the seller that you're serious about buying their house and that you plan to move forward.
How Much Money do you need for your Earnest Deposit?
Your earnest deposit shows confidence in your offer and ability to purchase the property, the industry standard is 1% of the purchase price.
So, if you were buying a $300,000 home, your earnest deposit expectation is $3,000. But, this is completely negotiable and it dictated by you when writing your offer. You can make It can more or less, depending on how you want your offer to be presented.
This Earnest Deposit is like a holding deposit in case you decide to back out of the deal or change your mind at the wrong time. So… is there a right time to back out? The residential purchase contract has several areas or contingencies that are designed to protect the home buyer.
The three main contingencies is the Due Diligence Period, Financing Contingency, and the appraisal contingency.
At the close of escrow your earnest deposit will typically be applied towards your down payment, your closing costs, or if you were able to buy a home with ZERO DOWN, gets refunded to you after closing.