Question of the day: What is EMD?

Email question of the day: What is EMD?

EMD is a Swedish band but I am making the assumption that my client's question actually referred to the Earnest Money Deposit.

The Earnest Money Deposit is the amount the buyer's give to accompany the purchase agreement. In general terms it indicates that the buyer is serious about his or her offer. In the Bakersfield real estate market the emd is generally 1 to 2 percent of the purchase price with a minimum of $1000. It is typically held by the escrow company until closing at which time it shows up as a credit on the buyer's closing statment and is used to pay some of the buyer's expenses.

The EMD is often in the form of a personal check although some agents/sellers are now requesting certified funds such as a cashier's check. The EMD can be made payable to the buyer's agent's brokerage in which case it will be deposited into a trust account or it can be made payable to a title company.

In the case of a Bakersfield short sale the EMD is generally held by the buyer's agent until the seller receives formal short sale approval at which time the EMD is submitted to the escrow company. In California we use the form SSA - Short Sale Addendum which specifically states how the EMD will be treated.