“In general, an earnest money deposit should be less than 2 percent of the total purchase price.”
You have found the perfect home in Gilbert, AZ! You're ready to buy. But the seller has had many interested home buyers so he or she requires an earnest money deposit. An earnest money deposit is (or should be) a part of any formal real estate purchase contract (REPC).
When a formal offer to purchase a home is made, it should be accompanied by an earnest money deposit check. The earnest money deposit helps build trust between the buyer and seller and assures both parties are acting in good faith or are "earnest." In general, an earnest money deposit should be less than 2 percent of the total purchase price. It is important for the buyer to demonstrate a sincere intent to purchase with an earnest money deposit. It is also important to protect the buyer. An earnest money deposit paid by check may require documentation from the bank that the check will or has cleared.
When a buyer and seller agree on the terms of a real estate sale, an earnest money deposit is most often placed in an escrow account. When a property sale closes, the earnest money deposit is usually applied to the buyer's down payment and closing costs, or just deducted from the total proceeds the buyer has to bring to the closing.
An earnest money deposit is a type of insurance until the sale is completed or cancelled. Ask your Solutions Real Estate associate, Jamie Thorley, to explain to you under what conditions the buyer must forfeit an earnest money deposit to the seller. In some cases, an earnest money deposit is returned in full to the buyer. The original REPC should spell out the conditions under which all or part of an earnest money deposit should be returned.
Need more information? Jamie Thorley, Solutions Real Estate will explain this and other real estate terms in detail. Contact Jamie Thorley today at www.liveingilbert.com. Jamie specializes in helping home buyers make sound purchases in the Gilbert, Arizona Phoenix Metro Southeast Valley!
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