Earnest Money Explained: How It Works for Home Buyers

What is earnest money? How much earnest money do I have to put down? And when is my earnest money due? Are you a buyer wondering about all of these things? Well...today we are going to break it down for you!

Earnest money is "good faith money" when you are buying a home. It basically shows the seller how serious you are and demonstrates your intentions to purchase their home. There is no set amount required, although some sellers may require 10% of the purchase price as earnest money. Typically, earnest money ranges from $500 to $5,000. However, the amount may vary based on the seller's requirements.

As a buyer, you can either put your earnest money down when writing your offer or, more commonly, deposit it after you have an accepted offer. Waiting until you have an accepted offer before putting your earnest money down is typically the best way to proceed.

Your earnest money is credited back to you at closing, usually used as part of your down payment. However, if you default on your contract, the seller may have the right to request the earnest money. Many factors come into play with how your contract is written regarding earnest money, so it is crucial to clearly communicate with your agent about your contingencies and intentions when making your offer to avoid confusion later in the process.

If you have more questions about earnest money, feel free to reach out to one of our agents at Castle Rock Realty for trusted advice.