FAQ How Much Earnest Money Should I Put Down

Real Estate Agent with Referral Patners LLC 0583719

recube with FAQHow much earnest money should I put down?

The amount of earnest money varies from one purchase to the next. There is no set formula or amount. The earnest money works as a deposit of buyer’s interest to the seller. A serious buyer is more likely to put down a sizeable deposit.

Sometimes sellers request that buyers put down more earnest money than offered. After all they are taking a risk removing the home from the market. Asking the buyer to take a greater risk in the process seems only fair to the seller. Your local real estate consultant can advise you regarding an acceptable amount to help insure the offer is accepted by the seller.

writing a checkAs a general rule a dollar amount of 1% would be a good indication to the seller that buyer is ready to make the purchase. The more serious the buyer the more likely the seller will be to negotiate and together come up with an agreement that meets both parties needs. Let’s be reasonable if a $500 deposit of earnest money is offered on a $500,000 house it doesn’t scream ready, willing and able buyer.

Yet a $500 deposit on a $100,000 house may be acceptable. Be sure to talk openly about your funds availability during the writing of the purchase offer with your local real estate consultant. Most purchases require a down payment of 3% or more of the sales price so 1% earnest is not really all that unrealistic.

One last note, the earnest money deposited at the time the contract becomes accepted is applied to the buyer’s down payment and other closing costs in the final closing.There are some risks associated with the earnest money. Be sure to discuss risks with your local real estate consultant. Most purchase contracts do close with the earnest money going towards that closing.

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Jennifer Polansky
Realty One Group - Goodyear, AZ
Get More Ooh-La-La for Your Mu-La-La

That is a great blog- thanks for sharing.  When I am comparing offers I def take earnest money as a sign of how strongly the buyer is in wanting to secure the home.  In a sellers market every bit counts.

Jun 05, 2012 03:15 PM #1
John McCormack
Albuquerque Homes Realty * www.AlbuquerqueHomes.com - Albuquerque, NM
AlbuquerqueHomes.com, Albuquerque Homes Realty

How much earnest money should I put down?  Excellent explanation and suggested Teral.  Hope you enjoyed a good day!

Jun 05, 2012 04:24 PM #2
Teral McDowell
Referral Patners LLC - Murphy, TX

Thank you, Jennifer me too & welcome to the Rain!

Jun 05, 2012 05:45 PM #3
Teral McDowell
Referral Patners LLC - Murphy, TX

I appreciate the suggest, John and your encouraging words.

Jun 05, 2012 05:46 PM #4
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

That really is a great explanation. Most buyers really have no idea and need a great agent like you to help them.

Jun 06, 2012 04:06 PM #5
Teral McDowell
Referral Patners LLC - Murphy, TX

Well, thank you, John for your kind words.

Jun 06, 2012 04:35 PM #6
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Teral McDowell