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FAQ Friday: What is earnest money?

FAQ Friday: What is earnest money?
FAQ Friday: What is earnest money?

Earnest money, also known as a good faith deposit, is a deposit made by the potential home buyer before closing to show that they are serious about buying the house.

Earnest money is submitted when your offer is accepted, and then it is applied toward your down payment or closing costs. It is typically around 1% – 3% of the sale price and is held in an escrow account until closing.

Earnest money protects the seller if the buyer backs out and the seller has to relist the home and start all over again.

It protects the buyer if something is wrong with the property. If the deal falls through due to a failed home inspection or any other contingencies (or certain criteria) listed in the contract, the buyer gets their earnest money back.

Your real estate agent will provide direction on how much earnest money you should offer. In a competitive buyer’s market, some earnest money deposits are increasing to show seriousness and aggressiveness.

In a slow or moderate market, your agent will advise you if an earnest money deposit in the standard range is acceptable.

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Kimmer Plunk

Based in Memphis and serving clients in West Tennessee and Northwest Mississippi. Serving others is a reward of its own and part of what makes me happy, and I've been doing that for 30 years through various activities including Girl Scouts, PTO, various board positions, unhoused ministry, and professional, award-winning teaching. I treat others the way that I want to be treated including being readily available, listening to your desires, answering your questions thoroughly, and walking you through the home purchase process. My ultimate goal is to see that you find the home of your dreams and experience the least amount of stress during the process.

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