What is earnest money, and why does it matter to sellers?
Earnest money, trust money, good faith money—it’s all the same thing. Essentially, the buyer offers to put money down to let you, the seller, know that they’re serious. The average amount of earnest money depends on your market and is always negotiable.
Earnest deposits are often low in our market, ranging from $100 to $500. In many other markets, it’s often 3% of the home’s purchase price. The earnest money is a term that you’ll want to review with your agent. If you don’t like the amount offered by the buyer, you can raise it and set a timeline in which they’re able to deposit the amount. In some markets, the money is transferred via old checks, wire transfers, or even online debit card transfers.
Keep in mind that there are certain points throughout the transaction where the buyer can cancel the contract and get their deposit back. If they cancel outside those windows, you’ll get to keep the money. If the buyer goes through the whole process and closes escrow, that money is credited to their down payment and closing costs. Remember that in an aggressive market where you have the upper hand as a seller, you can make the money non-refundable, meaning that there will be no question about who gets it if the buyer walks away.
In part eight of this series, we’ll dive a little deeper into home inspections and appraisals. In the meantime, if you have any questions, don’t hesitate to call or email me. I’d love to hear from you.