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What is the earnest money deposit, and when is it due?

Updated: Feb 6

Are you in the process of buying a new home and feeling overwhelmed by all the expenses involved? One term that you may have come across during your search is "earnest money deposit." But what exactly does this mean, and when do you need to submit it? Stay tuned for a comprehensive understanding of this crucial aspect of buying a house!

What is an earnest money deposit? When entering into a real estate transaction, it is common practice for the buyer to make an earnest money deposit. This deposit serves as a sign of good faith and commitment towards purchasing the property.

The timing of when the earnest money deposit is due can vary depending on factors such as local laws or what is stated in the purchase agreement.

Typically, it is expected that the earnest money deposit be submitted within a few days after both parties have agreed upon and signed the purchase contract

It's important for buyers to carefully review their contracts and consult with their real estate agent or attorney to ensure they understand exactly when and how much they need to submit for their earnest money deposit.

Why is an earnest money deposit required? An earnest money deposit is required to show the seller that you are serious about purchasing their property. It serves as a form of assurance or guarantee that you have genuine intentions to proceed with the sale. By providing this deposit, you demonstrate your commitment and financial capability to complete the transaction.

The amount of the earnest money deposit typically varies depending on factors such as the purchase price of the property. It can range from 1% to 3% of the total purchase price, although it is ultimately negotiable between buyer and seller. The funds are usually held in an escrow account until closing, where they will be applied towards your down payment or closing costs. In cases where a deal falls through due to contingencies specified in your sales contract, you may be able to get your earnest money back.

When is the earnest money deposit due? The timing for paying the earnest money deposit depends on the terms agreed upon in the real estate contract. It can vary from one transaction to another. Here are a few key points to keep in mind:

  • The deadline for submitting the earnest money deposit is typically outlined in the contract.

  • It's common for buyers to submit their earnest money within a few days of reaching an agreement with the seller.

  • In some cases, you may have up to 72 hours after your offer has been accepted to deliver the funds.

Remember, always review and adhere to the specific instructions set forth in your contract when it comes to submitting your earnest money deposit.

We offer an exceptional First Time Homebuyer Course that not only guides you through the entire process but also equips you with valuable resources to simplify your journey.

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