When one of my clients is about purchase property the first thing I tell them is that they need to have funds available for a deposit. This is what is called an Earnest Money Deposit. It is a "good faith" deposit, not a down payment. A deposit showing that in good faith you are going to purchase the property. The amount of Earnest Money differs from house to house. If there is a lot of interest in a home, a larger amount could give you more of an advantage . If not, a lower amount could work. At the time of the offer, the Earnest Money check is given to me. If the offer is accepted, I deliver your check to the escrow holder, it is cashed and held until closing.
At closing, the Earnest Money is credited to you, the buyer, against monies due as follows:
- Purchase Price: $300,000
- Closing Costs: $8,000
- Due from buyer: $308,000
- Less Earnest Money: $5,000
Total Due from Buyer: $303,000
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