About Earnest Money Deposits
Earnest money is a good faith gesture a homebuyer shows the seller when they agree on a purchase price and terms. This money, typically 1% to 3% of the sales price or whatever is customary for the local market, is deposited with an escrow agent or title company, a neutral third-party that serves to finalize the transaction for both sides.
Earnest money shows the buyer is serious. If the buyer pulls out of the contract, the seller could lose valuable marketing time. They’ll have to start all over again to market the home. Earnest money also protects the buyer. The buyer can get out of a sales contract and get their money back if contingencies outlined in the purchase agreement aren’t met. Typical contingencies are that the buyer’s lender agrees to make the loan, the appraisal meets or exceeds the sales price of the home, the home passes inspection, or that the buyer sells their current home before closing on the seller’s home.
Earnest money paid upfront in the transaction means the buyer has to come up with less money at closing or the deposit can be used as part or all of the down-payment.
Lynnette Vazquez
(951) 214-1755
LV@lynnettevrealty.com