What is earnest money?

Answer:

Earnest money is a good faith deposit on the property that a buyer wants to purchase.

Earnest money is typically between 1/2 to 1% of the offer price of the home (usually 1%).

It’s used to pay closing costs as well as the down payment.

Earnest money is held in a non-interest bearing account (escrow), by the title company, until the closing when the funds are either dispersed or the deal is terminated.

The title company will give a receipt for the earnest money.

Earnest money should be given to the title company no later than three days after signing the contract.

Once they have the signed contract, the title company will begin a title search and determine if the property has a clear title.

For more information on clear title and cloud on title, click here.

Worse case scenario, if the buyer is in breach of contract and defaults on the sale they could lose all of their earnest money.

If the transaction does not close, the money will either be returned to the buyer or kept by the seller, depending on the circumstances and the wording of the contract.

If you have any other questions about earnest money, give us a call.

By | 2015-04-15T21:15:13+00:00 April 15th, 2015|Title Questions|