Many buyers have been asking me questions recently related to Earnest Money so I thought I would provide a quick FAQ below.
Q: What is Earnest Money?
A: Earnest Money is provided to a home seller as a sign of good faith by a home buyer. It provides the seller with a guarantee that the buyer wants to purchase the home.
Q: How much is it?
A: The amount of Earnest Money is determined by the seller and their real estate agent. It is normally 1% of the home’s list price.
Q: When is the Earnest Money provided to the seller?
A: Earnest Money usually accompanies an offer submitted to the seller but an Alternative Earnest Money Deadline may be mutually agreed upon by the buyer and seller.
Q: Where and when is my Earnest Money deposited?
A: The Earnest Money should be deposited into an Escrow account within 24 hours of mutual acceptance of the contract offer. The Earnest Money is normally held by a third party such as a Title Company but can be held by the listing agent’s brokerage office as well. If the buyer and seller cannot negotiate the contract terms then the Earnest Money is not deposited and returned to the buyer.
Q: Do I get my Earnest Money back at closing?
A: Buyers can choose to have their Earnest Money returned at closing or may apply their Earnest Money toward down payment or closing costs.
Q: Do I get my Earnest money back if the contract is terminated?
A: There are many factors that determine whether or not Earnest Money is returned to a buyer. It is dependent on who terminated the contract and for what reason. If a problem with the home is discovered during the inspection and the buyer takes the appropriate measures to terminate the contract the money should be returned but this is not always the case. In the event of an Earnest Money dispute between the buyer and seller, the Earnest Money is not released by the Earnest Money holder until the dispute is resolved.
Contact me about buying a home in Colorado Springs at 719-660-9058
Colorado Springs Real Estate Agent, Patricia Beck, providing real estate services to home buyers and sellers.