What is Earnest Money Deposit?
An earnest money deposit (aka good faith deposit) is like a promise to the seller that you are committed to purchasing the home. It lets the seller know that you are serious about buying their property, and by doing so they are taking the listing off the market or listing is as 'pending' status until sold.
Where does this earnest money deposit go?
Typically, the deposit goes to a third party company such as a title company or attorney. They hold the money until closing, where it can go towards the closing costs.
How much money should I deposit?
There is no standard amount of money required. It is what the buyer is willing to offer. A general rule of thumb is 1% of the purchase prices. For example, if the purchase price is $200,000, your earnest money is going to be $2,000. However, in a seller's market, sellers want to know you're serious so they don't have to put the house back on the market. The more money you are able to put down, the stronger the offer will be.
What happens if I end up backing out and cancel the contract?
In the state of Florida, the As-Is Contract is used and fully protects the buyer to allow a 100% refund on their deposit, given that they are still in inspection period or they are unable to meet the conditions of their loan approval.
How else can I put in a strong offer besides putting down a huge initial deposit?
In this competitive market, something that might get you a leg up on other buyers is offering to add more money once inspection period has passed. It may not make the most sense to the buyer, because they've passed inspection period and ready to move on with the deal. However, they're are old school agents that educate sellers that this is a more serious buyer wanting their home and it works! So if you want to sweeten the deal, let them know you WANT this house!
Have more questions about earnest money deposit? Feel free to email us at firstname.lastname@example.org.
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