How much earnest money should I put down?

Question

I found my dream house and will make an offer tommorrow. How important is the earnest money? The house is vacant, so the seller is motivated.

Answer 1

first of all, disregard what BUD says below...he is wrong!

the earnest money is not required with your offer, but you should offer as much as you possibly can, in order to let the seller know you are serious about purchasing. you need a realtor, if you don't have one already. in your offer, make sure you state that it is contingent upon financing, a home inspection, & be sure to purchase a home warranty if the buyer doesn't provide one.

if the offer is accepted, and you cannot meet the above contingincies, such as your financing wouldn't go thru, or the home inspection showed major problems (with plumbing, heat/AC, etc), then you can easily void the contract and have your earnest money returned.

and, if everything goes well and you DO purchase your dream home, at closing the earnest money you put down will be credited back to you--basically, whatever you give as earnest money will be applied toward the amount of cash to bring to closing. say you need to bring $2500 for closing costs, and you put down $1,000 deposit, then you will really only need $1500.

also remember though, you are "buying" a bit of the seller's market time with the earnest money. the more you put down, the more serious you appear about buying the home.

and, if you back out because you change your mind, or decide you found something better, don't expect to recieve the earnest money back. if you change your mind and decide not to purchase this home when you have a contract, you breach your contract and teh seller can seek damages from you, and withhold your earnest money.

good luck with your dream home! have a great independence day!

Answer 2

Ultimately this is a matter of agreement between buyer and seller.

The purpose of the earnest money is to assure the seller that the buyer won't waste the seller's time, with the house off the market while the sale is processed.

I never put down more than $1000 --- though last house I bought was ten years ago.

I have been asked for 20 percent "down payment" from an agent who didn't know what she was doing---that was before offer was accepted and any closing date was set.

If the buyer is motivated, a reasonable amount of earnest money is likely to be accepted--I shouldn't think more than $5000 for a $300,000 house, taking into account inflation since my personal experience--but that is my opinion.

You might try making a phone call to a couple of real estate agents to find out what current practice is in your area.

As a buyer, you can always go to another agent if you think the agent you are dealing with is "sticky". The agent almost always is the agent of the seller and not the buyer so you owe him or her nothing.

Answer 3

I have bought three houses in 10 years ranging form 60k to 200k and never paid more than $500 down for earnest money.

Answer 4

$500.00 is typical in the US. £500.00 is typical in the UK.

The usual contingencies will protect your earnest money -- inspection, mortgage, etc. -- so if the deal falls through for one of those reasons you'll get it all back. If you simply withdraw your offer or change your mind you will lose your earnest money.

The seller's motivation has nothing to do with the amount of earnest money that you put down.

Answer 5

Do NOT put any earnest money down, so you realize that this is money that you can NOT re-coup if the deal falls through? it is not a wise decision unless you are pre-approved for a loan or something of the sort... You need to think this one over

Answer 6

I'd avoid any property where the seller wanted more than a 3% deposit. I'd expect the range to be between $1000 and 3%.

Answer 7

When I worked in a real estate office, people would usually give from $500-$1000. They may require more in a different state. I was working in Idaho then.

Answer 8

Sounds cool

Answer 9

$500 should be sufficient..no more

Answer 10

normally it is 10%