Let's Talk... Earnest Money

Posted By Kim PeasleyParker @ Sep 28th 2019 11:59am In: Buyer Information

Let’s Talk… Earnest Money Part 1

 

Earnest Money also occasionally referred to as Good Faith money, shows the buyer is intentional in purchasing a property. Some common questions that are asked about earnest money are:

“Is it required?” No, per law earnest money isn’t required.

“Who holds the Earnest Money?” This is agreed upon in the contract. In our market, the buyers’ agent will hold the earnest money. There are some exceptions and that is normally for foreclosure properties or luxury properties.

“Will I get back my money?” The buyer will be credited with the Earnest Money at closing. If the transaction doesn’t close, you could lose your earnest money depending on the circumstances.

  • Financing falls through – Earnest Money is returned to the buyer
  • Repairs are not agreed upon between the buyer and seller – the buyer receives the earnest money
  • Buyer refuses to allow repairs after inspection report – if the buyer refuses to purchase the property after the inspection or allow the seller to complete the repairs. Earnest Money will go to the seller if using the Repair Procedure. If using the Due Diligence Addendum, buyer will get earnest money back.

“How much Earnest Money do I have to pay?” This varies by the market area and the price of the home. Some sellers will accept no Earnest Money, other sellers the sky is the limit.

“Do I have to pay the money today?” The contract allows for collection of the earnest money at the time the agreement is written up or within a specified amount of days following ratification of the agreement.

“Can I bring cash?” NO NO NO Earnest money is something that a lender will want to verify came out of your account. Cash doesn’t leave a good paper trail. The lender will want to see the check (personal or cashier’s check). They will also want to see where the money was taken from your account.

Earnest money must be placed into an escrow account specifically for client money by the Brokerage holding the account. This account is subject to audit at any time by the State of South Carolina.

So, when making an offer or accepting an offer, be sure to talk to your real estate agent about earnest money.  


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