Earnest Money – What Is It, and How Much Do I Need?

465782When you make an offer to purchase a home, the document you sign (the Purchase Agreement) is often referred to as an Earnest Money Contract, largely because the first item, below the buyers’ name, is the earnest money tendered. This amount is negotiable between buyer and seller, but, in actual practice, tends to be $1,000 – 2,000 in the lower price ranges to 1-2% of the purchase price as the price increases. Once the buyer and seller have agreed to all terms and signed the agreement, the earnest money check is deposited in the listing company’s trust account and is counted as part of the buyer’s down payment at closing. It also represents the buyer’s good faith intention to follow through on the purchase of the home. ┬áThis money is not at risk if all parties abide by the terms in the contract. You should keep a copy of your canceled check (both sides) and make sure that your mortgage company has a copy.

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