Speicher Select Properties, LLC
307 State Street
Johnstown, PA 15905 Office: 814-255-9500 Fax: 814-255-6767
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Earnest Money Deposit
Most homebuyers today understand they need a
sizeable down payment and a strong credit score to secure a conforming home
loan. Buyers also must hold liquid funds for another financial obligation—an
earnest money deposit—to be paid when they make an offer on a home.
In short, earnest money is handed over to
the seller’s agent or the title company when a purchase contract is signed.
This demonstrates that the buyer is serious about the transaction and is
backing it up with cash. Without earnest money, buyers could simply make offers
on many homes, essentially taking them off the market until they choose a
Sellers rarely will accept
offers without such deposits.
There is no set amount for an
earnest money deposit so it can be up for negotiation. If the home is popular
with multiple bidders, the seller may ask for up to 3% of the asking price as
earnest money. Ideally, the amount is enough to impress the sellers,
particularly when they’re entertaining several offers.
Assuming the transaction
results in an accepted offer, earnest money goes toward the buyer’s down
payment and closing costs. If the transaction falls through, the buyer may have
to forfeit a nominal cancellation fee or more.
Be sure the purchase
agreement outlines the refund process. Remember, a buyer can lose earnest money
through default, which happens when he or she does not perform according to the
terms stipulated in a purchase and sale agreement.
Work carefully with your
Prudential Real Estate agent to ensure a clear understanding of all terms and