Where Does My Earnest Money Go?

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted.

According to Wikipedia:

Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.

For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.

In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

  1. Earnest Money is submitted to an escrow company with the accepted purchase contract
  2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
  3. If there are no closing costs or down payment, the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

  • Selling Real Estate Agent – A conflict of interest
  • Sellers – Too risky
  • Buying Agent – They shouldn’t have your money in their account

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March 28, 2010 by · Leave a Comment

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About Rick

Rick Wamsley has been in the mortgage industry for over 15 years as both a branch manager and loan officer positions. He is very knowledgeable in all residential mortgage programs. As a former multi-million dollar real estate agent he will confidently handle your loan to make sure that all goes smooth. No matter where you are in your mortgage needs Rick will take time to make sure you have the very best mortgage. If you're looking to purchase a home but don't know where to start, then Rick is your first step. He will guide you through the process with ease and make your dreams of home ownership come true. He loves spending time with his family and encourages all people to strive for a life with no limits. His wonderful personality coupled with years of experience will make your mortgage experience one to remember and share with others. NMLS 166874 and TN license 110733

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