When you decide on a house to buy and want to write an offer for it, you will also need to send a check with the offer. This check is for earnest money, and it is an important part of every offer. The earnest money tells the buyer that you are serious about the deal, but you should use caution when putting in an offer and earnest money by including contingencies that protect you. Here are several things to understand about earnest money and ways to protect it when writing an offer.
What earnest money is and how much you should put down
Earnest money is a deposit you are making for a house, assuming the seller accepts your offer. If the seller rejects your offer, you get this money back instantly. If the seller accepts the offer, they will keep this money but will not receive it until closing. This money is basically required to prove that you really want to buy the house and will do everything you can to make this happen. There is no set limit or guidelines with the amount needed for earnest money, but it is typically at least $500. In some cases, it can be a lot more than this.
Ways to protect your earnest money through contingencies
When you put this money down, you are assuming that you fully understand the condition of the house, along with all the problems it has. Because you really do not know everything about the house yet, it is important to include contingencies in your purchase offer that will give you a way out of the deal if there are issues with the house. If you include contingencies, you can get out of the deal if problems arise, and you will receive the earnest money back. For example, you could state that a contingency of the deal is that the house must appraise for the offer amount. If it does not appraise for this amount, you could back out and take your earnest money with you.
What happens to the earnest money if you back out
If you do not have a valid reason to back out of the deal but decide to anyhow, you will not get the earnest money back. Instead, the seller will get to keep it.
Earnest money is an important element of an offer, but you should take the appropriate steps to protect yourself when writing an offer. A real estate agent can assist you with this if you need help.Share