So you did that home search thang and made and offer and got that bad boy under contract! Congrats! Depending on your state contract, you will be required to turn in a deposit on the home. Earnest money is a negotiated term in the offer that is then deposited in an escrow account after an agreement is reached between buyer and seller. This helps to show you’re serious buyers. This money is put into a third party account and held until closing, where it can be used as part of your down payment or closing costs.
To give you context, one of the first terms I look for when I’m on the other end of the table representing the seller is how much money is the buyer putting down for earnest money.
In Utah, earnest money is typically 1% of the total purchase price of the home. So on a 300k house, were looking at about $3,000. This isn’t always possible for some people. Just realize, terms can be just as important as the price. So the lower the earnest money, the less attractive our overall offer is. Sometimes we have to compensate and make other parts of the offer stronger for a lower amount in earnest money.
After your our is accepted, you have 4 days to turn the money into the brokerage and the brokerage will open up escrow. it is vitally important that we get this turned in so we are in compliance with the contract. If we do not get the money in by this time, we would have contractually defaulted on our obligations, and the seller would be able to take other offers.
Many buyers are concerned about making an offer and losing the earnest money if you decide against the house or something goes wrong. Fortunately, as long as we make the offer subject to our due diligence, we have until this deadline to back out of the contract with no penalty or obligation. In other words, if we do an inspection and you are unhappy with the condition or repairs needed on the property, you can cancel the contract and get your earnest money back. This is intended to protect you as the buyer from defects on the property.
This keeps you and your money safe, and gives you to opportunity to lock a house up and make sure you are happy with it. Reach out with any q’s!