Earnest money - Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

Earnest money is typically held in an escrow account of the real estate agent and deposited once an offer has been accepted by both parties.

Be certain to read your home purchase agreement to determine what your options are regarding the treatment of your earnest money deposit in the event of a cancellation or other condition.

If the buyer defaults on the sales contract in many cases the buyer will have to forfeit their earnest money.

If purchasing a FSBO property, make sure the earnest money check is made out to the title company and not the seller.

If possible obtain a copy of the check for your mortgage broker, the lender will need a copy!

In Lien Theory states such as Texas, they use title companies, owned by Real Estate Attorneys to close real estate transactions. The title company in this case would be the one to hold the earnest money in the escrow account until closing.

If you obtain 100% financing, your earnest money will be used towards your closing costs.

Earnest Money is never distributed to the seller until settlement. It is held by the real estate broker, or in states where it is customary to hire the services of attorneys for real estate transactions, in the seller attorney's escrow account, only to be disbursed to the seller, along with the remainder of the proceeds, at closing. Typical Earnest Money is between 5% to 10% of the purchase price. However, any other amount can be negotiated.

A good purchase contract always stipulates that the purchase agreement is contingent upon the homebuyer's successful procurement of a mortgage. In the case the home buyer applied for and was denied financing, the Earnest Money is promptly returned to the buyer.

At the time of closing on a property, earnest money is disbursed as directed by the buyer; usually credited toward the selling price of the property. If for some reason the transaction does not close, the funds can be disbursed to either the buyer or seller, depending on the reason the closing did occur.

Earnest money amounts differ depending on the seller and the sellers realtor. They may also ask for a larger earnest deposit if it looks like the buyer may take some time to close the mortgage transaction. This is an incentive for the seller to not take other offers.

Earnest money - Earnest money is the amount of money you put down on the home you are purchasing when you initially sign the purchase contract.

This "deposit" shows good faith and that you intend to follow through with the contract. If you back out of the contract for anything other than a major reason, typically earnest money is kept by the seller.

Most contracts have a stipulation or clause that states that earnest money is to be refunded if buyers cannot qualify for a mortgage loan. Stipulations such as this make it very important to seek loan approval as quickly as possible. Some sellers will not except a contract from a buyer without an approval letter.

Earnest money is applied to your down payment and closing costs at settlement. The listing agent holds the earnest money in an Escrow account until closing, and brings a certified check for the amount to closing.

Earnest money is still needed even if you obtain 100% financing. If so, the money will be applied to the closing costs associated with your loan.

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