13 Jun A Few Things to Know About Earnest Money
Earnest money, also known as a good faith deposit, dates back to ancient times. In the old days, it was known as the earnest penny and represented the payment binding a purchase, often times an animal or a piece of land. It has since evolved to be a fairly important step of the home buying or selling process.
Today, earnest money represents the money that serves as the deposit for a real estate purchase. The money is used to represent that the potential buyer of the property is serious about wanting to complete the purchase. In real estate, when a buyer makes an offer to buy a home, he or she signs a contract that states earnest money will be paid. This amount is completely dependent on the market and the price of the home in question.
In addition, the seller must accept the offer that the buyer has proposed. Often times, negotiations take place until the buyer and the seller both agree on an amount that works for both of them. Once the amount has been agreed upon, the money is held in escrow until the closing of the property. Typically, the money is put towards the buyer’s costs at closing.
If for some reason the offer is rejected, the money normally is returned to the buyer. If the buyer decides that he or she no longer wishes to purchase the property, there are several circumstances that come into play. On many occasions, the buyer forfeits the money if he or she retracts the offer.
While earnest money’s role has changed over the centuries, it still plays a crucial role in the home buying and selling process. If you have any additional questions about the escrow process, please feel free to contact us. We’d be happy to assist you!