The Importance of Earnest Money in a Real Estate Transaction

Real Estate Agent with Decorus Realty DRE# 3207607

By Vickie Gylling

Just the thought of buying a home can be scary if you don't have the right agent representing you to give direction on the how's, why's and can I's. There are also many financial steps to consider and have the money at hand. From the moment you meet with an agent you are going to be given information that requires action to make a transaction run smoothly. In purchasing a home, there are lots of financial responsibilities that fall on the buyer to make sure that they have the dollars to cover the expenses or the deal could fall apart. A few of these are:

~Down Payment

~Inspection Fees

~Appraisal Fees


~Earnest Money

Let's consider that last one, earnest money. Why is this so important to the transaction? You are probably thinking I am already providing the seller with my pre-approval letter that shows the bank has reviewed my financial position and agree that the offer that I am making to the seller is in my budget.

So why do I need to provide the seller with an earnest money check also? This will show the seller your true intent to follow through with the sale. Earnest money checks can range in amounts based on the offer price you are making to the seller. Most agents will tell you 10% of the offer price should equal the amount of the earnest money check. This check (unless you are making an offer on a short sale home) will need to be deposited into the selling agents brokers earnest money account within 3 days of the offer being made. If you are doing an inspection, you can put terms into the contract that stipulate the earnest money check NOT be deposited in the account until the inspection contingency is removed from the contract. The reason for this contingency would protect the buyer to ensure that if something should negatively appear in the inspection and the buyer decides to walk away from the property, they would be able to void the check and move on. Some brokerages will stipulate that they do not have to issue your check back for up to 30 days after the cancellation, so make sure you ask what the sellers brokers return policy is prior to making the offer and turning your check over. Once the check is turned over, it will be deposited immediately in most situations. So make sure you have the dollars in the account to cover your check.

What this check shows the sellers is your full commitment to purchase their property. The lower your earnest money deposit the seller may be hesitant to move the home to a pending status on the MLS for fear of loosing other potential buyers. So when you are getting ready to write out the check, make sure your TRUE intentions reflect in the price of your check.

The other thing to remember is once you and the seller have signed all the documents, all contingencies have been removed and all CIC documents time frames have been passed (if these apply), your ability to received these monies back in full or at all are not in your favor. However if something were to change in your financing abilities, and your contract indicated upfront that if for any reasons financing can not be made, the buyer is to receive all earnest monies back, this money is as good as gone. The seller may also be able to go after you, your agent and their broker legally for any other fees or moneys the seller put into the property or deal to fulfill their side of the contract.

The thing to remember, once you sign all the contracts, you are in a legally binding contract!! It's as easy as that. If you truly want the home you are making an offer on, show your strength & full interests in the amount of your personal money you are willing to put in with the earnest money check.

When it comes to choosing professionals to assist you with your real estate needs...Experience is Priceless!  Miami Best Real Estate Team, 786-704-8482


FOR SALE: Luxurious Mediterranean Estate nestled in an exclusive, gated enclave of 10 luxury homes - De Garmo Estates.    This elegant home commands a priviledged location within the community situated in the back corner. Completely Walled & gated for extra privacy. Walking distance to the village & best private schools. Great floor plan and design. Impressive soaring ceilings throughout all living areas with lovely views of the outdoor patio and pool.Set amidst towering trees, tropical plantings and exotic foliage.  Asking $2,185,000.  

For more information about this home or other South Florida luxury properties contact Andre Shambley 786-704-8482

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The Condo Shop | Decorus Realty

16850 Collins Avenue, Suite 105

Sunny Isles Beach, FL 33160

T: 786.704.8482 |








Comments (1)

Tanya Runkle
America's Premier Mortgage - Vancouver, WA

Amen! Thank you for the post, when we work with home buyers we often ask them to put themselves in the shoes of the seller and be honest if they would entertain an offer that did not look serious. 

May 09, 2011 11:12 AM