Guide to Earnest Money
You might have heard of earnest money as you’ve shopped around for a home, and you might have even seen it as a tool we list on our website!
But – what is earnest money?
Earnest money acts as a deposit (also called “good faith deposit”) on the property you’re looking to purchase. The seller and buyer sign a contract that defines the conditions of refunding the earnest money as well.
Why is earnest money important?
A seller will know you’re serious about buying the home, which can help reassure them to take the house off the market while you both wait for appraisal and inspection results. An earnest money deposit might also help separate you from others buyers, if you’re buying a property with high demand.
How much earnest money do you put down?
This all depends on how the market is doing and the condition of the home. Think – higher earnest money deposit for a seller’s market in a neighborhood with plenty of bidding wars, and a lower earnest money deposit for a buyer’s market and a fixer-upper.
On average, an earnest money deposit ranges between 1%-3% of the property’s purchase price. Before you decide on an amount, talk with your real estate agent – they’ll be able to assess the property and any market-specific factors.
Okay – so how do you submit earnest money?
Pacific Alliance Title has set up a tool that you can use that makes things easy-peezy for you! EMTransfer is a cloud-based service that allows agents, buyers, and earnest money holders to securely document, collect, and disburse earnest money 100% electronically.
So when you close with us, you’ve got an easy option!
For more real estate guides, stop by Pacific Alliance Title’s Blog.