Talking Real Estate: Abacoa Clients Ask, Why Do We Need Earnest Money?

One of the more common questions about real estate Jupiter clients have — particularly among those for whom the home they are about to purchase is their first — is about the earnest money deposit. What is earnest money, and why is it so important? Abacoa

Earnest money is a way to let a buyer know you’re truly interested in closing the deal with them, to the exclusion of all else. When shopping around for real estate, Palm Beach County buyers might see several properties they’re interested in; without an earnest money deposit, those buyers could put in multiple offers on several homes at once, then pick among the replies they like best. While it might seem like a good deal for the buyers, it would be untenable for the sellers to have to take their homes off the market while the buyer decides whether they’re serious about the deal.

Depending upon market conditions, buyers who make an offer are expected to put between 1 and 2 percent (or less) down as earnest money; when the market is particularly “hot” or a seller knows their home is in high demand, they might ask as much as 3 percent. Typically the title company will hold the money as the deal finalizes, and the funds will be held in escrow.

If the seller accepts the offer, the earnest money is used to help pay the down payment and closing costs for the mortgage loan. If the offer isn’t accepted, or if the buyer finds something serious they don’t like about the home (and the earnest money contract is properly written), the money is returned, usually minus a relatively small fee. For more information about real estate Florida buyers and sellers can use, contact our office today!

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