First Time Home Buyer Tip of the Week – 03/25

What is Earnest Money? 

Do I need it and how much is it? 

So…..what exactly is “Earnest Money”? Well, earnest money is a term used in the real estate world to represent good faith among the prospective buyer and seller. Wait,….WHAT!? 

The term earnest money is simply a check that you, the buyer, would submit along with your initial contract offer to the seller. It’s usually a personal check with an amount anywhere from $500 to $1,000 but could also be as low as $0. This lets the sellers know of your interest in their home.

So, you’ve fallen in love with a home and wish to put in a contract offer through your real estate agent. Next, your agent will request an earnest money check to accompany the offer and the sellers will have their allotted time to respond. Once the contract has been accepted you will have a couple opportunities to withdraw from the contract and your earnest money will be refunded. For example, the property has a cracked foundation. Your realtor will be able to explain that part of the process a little better.

The best part is, once you’ve decided to proceed with the contract and purchase the home, your earnest money will become part of your down payment! If your down payment is $5,000 and you’ve already submitted the $1,000 in earnest money, you only have $4,000 due at closing.

Matt Shymanski – 314-761-5903 - [email protected] - NMLS 1572469