Christine Gallagher REALTOR® Associate

When buying a home, one of the key steps in the process is making an earnest money deposit. This deposit is a show of good faith on the part of the buyer, indicating that they are serious about purchasing the property. In this blog, we’ll take a closer look at what an earnest money deposit is, how it works, and why it’s important.

What is an Earnest Money Deposit? An earnest money deposit is a sum of money that a buyer puts down as a deposit on a property they are interested in purchasing. This deposit is typically made at the beginning of the home buying process, when the buyer submits an offer to purchase the property. The earnest money deposit is held in an escrow account until the sale is completed, at which point it is applied towards the down payment or closing costs.

How Does an Earnest Money Deposit Work? When a buyer makes an offer on a property, they will typically include an earnest money deposit as a part of the offer. The amount of the deposit can vary, but it is typically a percentage of the purchase price of the property. The deposit is usually held in an escrow account by a third-party, such as a real estate broker, attorney, or title company. The purpose of this escrow account is to ensure that the funds are held securely until the sale is completed.

Once the offer is accepted by the seller, the earnest money deposit is applied towards the down payment or closing costs. If the sale falls through for any reason, such as the buyer not obtaining financing or the inspection revealing significant issues with the property, the earnest money deposit may be refunded to the buyer, depending on the terms of the contract.

Why is an Earnest Money Deposit Important? The earnest money deposit is important because it helps to show the seller that the buyer is serious about purchasing the property. In some cases, a seller may receive multiple offers on a property, and the earnest money deposit can help to differentiate one offer from another. It also helps to provide the seller with some assurance that the buyer is financially capable of completing the purchase.

Additionally, the earnest money deposit can provide some protection to the buyer. If the seller breaches the contract or fails to disclose material defects with the property, the buyer may be entitled to a refund of their earnest money deposit.

In conclusion, an earnest money deposit is a key component of the home buying process. It helps to show the seller that the buyer is serious about purchasing the property, and can provide some protection to the buyer in the event of a breach of contract. If you are in the market to buy a home, it is important to understand the role that an earnest money deposit plays in the process and to work closely with your real estate agent or attorney to ensure that your interests are protected.

Christine Gallagher is a Licensed Real Estate Agent with Century 21 Action Plus Realty located at : 132 Farnsworth Ave Bordentown City NJ 08505. Office: 800-299-2129 Cell: 732-701-7270