Will more earnest money help you win if you are competing for a home? Maybe. It certainly could not hurt! Earnest money is also considered an act of good faith and it is typically around 1% of the purchase price or more. Every state and area is unique, so it is best to ask your REALTOR!
The fact remains that many communities have a shortage of supply and a continually increasing demand with low interest rates and the rising costs of renting. There are more buyers than ever looking for their piece of the American Dream of owning a home! And with all of those buyers and so few homes, you are bound to be faced with competing with other buyers for a home. No one wants to come in at 2nd place! So how can you get your offer to the top of the stack? There are several ways to stand out.
One of them is the amount of earnest money that you are pledging with your offer. Upon acceptance, this agreed upon amount is deposited into the trust of the listing company to held until closing. In other words, your check is cashed and the money is held to be credited back to you as part of your down payment on the home at the final closing table.
Is there risk involved? Possibly. You need to discuss your options for the return of your earnest money deposit should you not follow through with the purchase.
What could be some reasons that a buyer might walk away?
Inspection issues might be at the top of the list. There could be unknown defects discovered during the inspection period that may derail the purchase for the buyer. Especially if the seller refuses to remedy. The buyer's earnest money would be returned in a timely manner, usually 10 business days after all parties have agreed to release.
Another reason could be that the appraisal showed that the purchase price was too high and the seller does not wish to adjust the price and the buyer does not wish to pay out of pocket. Consult with your agent or attorney to assess the risk.
As a seller's agent, I can tell you that when there are multiple offers for their home, there will be usually two or three that are almost identical in every way. Purchase price, closing date, concessions, financing......but there is usually one difference. Where one buyer will offer the minimum earnest money, another will offer twice or maybe 5 times as much to secure their offer and interest in the property.
It COULD make a difference if all the offers are alike. Doesn't hurt to try in this market where the average buyer offers on 3-7 homes before "winning". Good luck out there and may the odds ever be in your favor through this crazy and exciting time in real estate!
Best,
Karen
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