Many home buyers know, at some point, they will need to have money to put down on the purchase of their home. Yet, they don't seem to understand at what point of the sale this deposit will be asked. This might come as a surprise to many homebuyers, but when a an offer is placed on a  home, it should be accompanied by a check. This check is referred to as the “earnest money” because the buyer is basically “serious in intention, purpose, or effort; sincerely zealous” about the purchase of a specific home (Dictionary.com, 2011).

The amount of this earnest money deposit commonly will depend on the purchase price of the home and/or the financial situation of the buyer. Other factors to consider is the marketplace and local customs.  In general, there is a common practice asking for at least 1% of the purchase price of the home. In this buyer's markets, a larger earnest money deposit might entice a seller to accept a much lower purchase price (don’t be swayed by an agent who suggests $500 to nothing down, in the end it will be your loss). So you see, your hard earned earnest money all depends on how your real estate agent handles the the Real Estate Purchase Contract. The buyer should feel confident in their understanding of what the earnest money deposit is and how it SHOULD benefit their purchase. A huge misconception is that the earnest money will not benefit the buyer. This is 100 % WRONG!

After negotiations of the home have presided, this type of earnest money funds can be applied to the buyer's down payment and closing costs or refunded at closing. Remember, your Real Estate Agent should explain your options on how your earnest money can be applied to the purchase of your home before you turn over the check…. Remember, Education First!

As a proactive Real Estate Agent, I educate my buyers and protect the interests of their earnest money deposit. Let’s make this simple and learn how to use your money in the purchase of your home.

Quick Tips for the Earnest Money Deposit:

• Bank Owned Properties requires 1% of purchase price and/or they can increase this amount while the home is being negotiated up to 2%.
• HUD Homes are dependent upon the listing provider of a HUD contract. Buyers should anticipate either 1% of the purchase price or $500/$1000 depending, again, on the purchase price.
• Short Sales can require 1% of purchase, but the buyer has more options due to the longevity of the contract.