THE ROLE OF EARNEST MONEY IN REAL ESTATE.

So, you've found your dream property but you're wondering how to make the full payment without losing the property?

Before thinking too hard, let us talk about earnest money. This might sound unfamiliar, but it plays a crucial role in securing your future property.

Think of earnest money as a down payment (sounds familiar, right?). It shows the seller that you are serious about buying their property. It's like a handshake agreement that says, "I'm committed” and takes the property off the market for a specific period.

Here's why earnest money matters for buyers:

1. It shows Serious Intent: In a competitive market, your earnest money stands out. It tells the seller you are not just browsing, you are ready to seal the deal.

2. It secures the Property: Earnest money holds the property for a specific period, giving you time to finalize things like inspections and mortgage approvals without the risk of someone else snatching it up.

3. It protects both Parties: In Nigeria, if you back out of the purchase without a valid reason (outlined in the agreement), the seller gets to keep a percentage of the earnest money as compensation for taking the property off the market. Or if the seller backs down, he/she gets to give you a refund. (Be sure to go through the terms before making the deposit.)

How Much Earnest Money Do You Need?

The percentage is higher on certain occasions, depending on the property's sale price.

However, it can be negotiable based on market conditions and the seller's preferences. Remember, a higher earnest money deposit can make your offer more attractive, especially in a competitive market.

Things to take into consideration:

1. Clarity: Ensure the purchase agreement clearly states the terms of the earnest money deposit, including the amount, refund conditions, and timeline.

2. Work with Professionals: Partnering with a reputable real estate agent can guide you through the process and ensure your earnest money is handled securely. Ensure a legal professional oversees the process to protect your interests.

3. Do Your Research: Understand the local market practices and common earnest money amounts in your area.

By understanding earnest money, you take a crucial step towards securing your dream property in a dynamic real estate landscape.

So, go, make that offer, and secure your future home with the power of earnest money.

Best regards,

Joan Obi-Okuhon

Real Estate Advisor.