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How Much Earnest Money Is The Right Ammount

This is a great Qusestion. We try to get at least 1 months mortgage payment to cover our client. As the money will be held in escrow and should not be an ojection. I would like to know what other people think around the country or state.

How Much Earnest Money Is the Right Amount?

There isn't any legal answer when it comes to deciding the right amount of earnest money. In general, the answer is whatever a seller is willing to accept. In some markets, the norm is to put down 1 percent of the total purchase price. For instance, for a $300,000 house, a buyer might be expected to put down $3,000.

But if a buyer is bidding on a hot property in a great neighborhood, it could make sense to boost the sum to increase the odds of the sellers accepting the offer.

Meanwhile, in other areas of the country, binder amounts are shrinking, says Lori Byrum, an associate with RE/MAX Executive Realty in Charlotte, N.C. "Almost all (buyers) are doing 100 percent financing so who really worries about the binder? We're way more worried about the appraisal," Byrum says about her market.

Source: Charlotte Observer, Allen Norwood (04/07/07)

Posted by Paul Renton ABR e-Pro, CPDE on 06/13/2007 08:26 AM

Comments (5)

5 Comments on How Much Earnest Money Is The Right Ammount

JUN

2007

The norms for earnest money deposits have remained pretty much the same in our area of West Michigna which is interesting because the price of homes has increased over the past decade. I've actually seen some offers which buyers have come in with less earnest or Zero. We counsel our clients to counter these offers.

I usually like to have a good deposit to show the offer is serious.

Well like you say- no any answer could be the right one if the sellers accept the offer and earnest money! However, I would think the proper amount of earnest would actually be 5% because if a buyer does not give 5% then the 5% clause is added to the P&S. Well at least here in MA it is.

JAN

2008

If the deal did not come through for the seller because the buyers money did not come through who has the right to the earnest money. because they told us the buyer did not want to sign off the check to us. I thought we would auromatically get the money. Please help me with an answer.

MAR

2008

If the deal did not go through because of one of the contingencies in the contract was not satisfied, then the earnest money should typically go back to the buyer. Most contracts have a contingency that says that the buyer must be able to get the financing. If the buyer notified the seller by the specified date in the financing contingency that they could not get financing then the buyer should be entitled to the return of their earnest money. If the buyer did not notify and it was a situation where they found out at the last minute near closing that something happened (long after the financing contingency had ended) and the buyer didn't get the money to purchase the home, then the sellers should get the earnest money. Every state may have different laws that impact how this works (so could vary where you are). So... the answer is that it will depend on your situation.

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