When listing your home, you should always ask for Earnest Money. Now the question becomes, just how much Earnest Money should you ask for well, let me share some insight with you.

1. Make the buyer think twice about backing out:
   1. Simply put, you need to have the buyer pay enough Earnest Money that it would act to discourage him from backing out of the contract. If the buyer only puts down $250.00 of Earnest Money on a $100,000.00 home, do you really thing that is enough to make him think twice about backing out of the purchase, I don't think so. Where as, $1,000.00 Earnest Money on a $100,000.00 would cause any purchaser to give it some serious thought before he deiced to precipitously back out. The key to remember here is, Earnest Money is applied to the buyer's benefit upon closing so, whatever he puts down now will go to pay his any monies he needs to close the deal. In short, the more Earnest Money, the more of a commitment the buyer has to close the deal.
2. Compensation for taking the property off the market:
   1. If you didn't reserve the right to continue to market the property during negotiations and execution of the Purchase and Sale Agreement then, during this time, your home should be off the market and placed in "Pending" status. Earnest Money should be enough to act as compensation to you and your Realtor if during this down time the buyer decides to back out and you are holding a home that was off the market for 10-20 days to execute the agreement.
3. Earnest Money should cover any and all expenses you might incur if the buyer decides to back out:
   1. Well, this point can cause some disention in the ranks because, many people realize that if they follow this rule then the amount of Earnest Money could sky rocket. True, that is possible so, you and your Realtor will need to have a heart to heart discussion about staying competitive in your market while still being able to cover any expenses you might incur. For the purposes of this discussion, I am making this point simply to educate you, not to suggest that on a $100,000.00 home you ask for $20,000.00 Earnest Money. In this economy and this local market, here in Nashville, that would be unreasonable and you would never get a showing.

So, all in all, Earnest money does 3 things.

•1.      Signifies to the Seller the level of realized interest the buyer has in the property.

•2.      Compensates the Seller for the time the property is off the market during the execution of the agreement

•3.      Covers all expenses the seller incurs if the buyer backs out.

Don't be bashful when asking for Earnest Money. It is a delicate balance between covering the three points above and staying competitive in your market. An experienced Realtor can truly help here and their knowledge and expertise will be invaluable. Good luck.