As I am sure is the case with many of those in the market for a new home, when it comes to an Earnest Money Deposit, buyer do not understand the intent. Hopefully, the below will assist in solving the mystery.
What Is An Earnest Money Deposit? An earnest money deposit, also known as a good faith deposit, is a specific dollar amount that a potential buyer pays to the seller in an effort to display their serious interest in a property. It's important to note that an earnest money deposit is not the same as a down payment.
The Purpose Of An Earnest Money Deposit:
How Much Good Faith Is Enough? So, just how much of an earnest money deposit is required? Truthfully, it depends on a number of factors, including the home's purchase price, your location and the standard as set by other sellers. In most cases, the earnest money deposit is negotiable and the seller will be happy in knowing that the potential buyer is serious enough to offer their money in good faith.
How An Earnest Money Deposit Is Used: If the transaction is successful and the buyer follows through with the purchase, an earnest money deposit is refunded to the buyer or applied to closing costs. If the buyer defaults or is unable to obtain financing, the seller often has the discretion to retain the earnest money deposit as damages or as otherwise described in the purchase agreement.
Using Your Dollars And Sense:
Before handing over a good faith deposit, make sure that you have faith in the person accepting your money. Potential buyers should not give an earnest money deposit directly to the seller, nor should they give it to anyone who claims to be with a brokerage firm unless their credentials are verified.
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