Did you know you could lose thousands of dollars or even tens of thousands of dollars, if you don’t understand how the earnest money deposit works when you’re buying a home?
Hi, I am Terry Tucker with eXp Realty, a 27-year veteran of real estate here in the San Ramon Valley. Let’s talk deposits!
If you’re a buyer thinking about buying a home, you’ve probably heard the term earnest money deposit, but what exactly is it, and why is it all at risk? Let me break it down for you.
First off, think of the earnest money deposit (also called EMD), as a good faith deposit. It shows the seller that you’re serious about buying their home.
When you submit an offer, you include this deposit as part of the deal. So, if you are making an offer on a home for a $650,000 purchase price, your good faith deposit would typically be $19,500 or 3% of the offered price. Once the seller accepts your offer, your earnest money deposit is held in an escrow account until closing. But here’s the key: this deposit isn’t just free money that you get back.
If everything goes smoothly, it gets applied toward your down payment or closing costs. But if you back out without a valid reason, like a contingency in your contract, you could lose that money! That’s right, the seller could have the right to your deposit for the breach of contract.
That’s why it’s important to have an experienced agent to negotiate contingencies like financing, home inspections and appraisal in your contract to protect your Earnest Money Deposit. These contingencies help protect your deposit if something unexpected happens and you need to back out of the contract.
Also, it is always best to work with your agent and escrow officer to see what your best options are for payment. Most title and escrow companies will take your good faith deposit in the form of a wire transfer or cashier check. Cash, debit and credit cards are not accepted.
If you would like more information on how to protect yourself and your deposit when buying a home, please contact me. I’m an experienced veteran agent, ready to assist you on the exciting journey of home ownership. Give me a call today.
