First Time Homebuyers-How Much
Earnest Money Do I Need?
Before we get to the “how much”, we should talk about “what is” earnest money.
Dating back to medieval days, the word earnest means “a state of mental intent” . We will ignore the mental reference here (don’t get me started) but the word “intent” is applicable. Earnest money given with an offer to purchase real estate literally means it is your Intention of forming a contract with the other party.
For example, East and west coast where housing is considerably more expensive, will require as much as 5% of the sales price to be delivered in option fees for a contract in real estate to be signed.
Here in Salt Lake the following is customary for earnest money in a real estate contract:
- $500 for regular real estate purchases under $200,000
- $1000 for regular real estate contracts for homes $200-350,000
- 1% of the sales price for real estate purchases of over $350,000
- $1000 for HUD homes
Earnest money is like a deposit that is kept either with your Realtor’s company in a trust account, or in the trust account of a 3rd party (either an attorney or a Title Company). It will be applied toward the purchase of your home when you go to the settlement and closing of your real estate purchase.
Earnest Money is refundable on your real estate contract provided you cancel according to contingencies of your contract. Your buyer’s agent will take care of explaining these to you (well, if you are working with Us We will…blatant commercial here) and keeping track of those deadlines for your protection.
So, be prepared to offer a customary amount of earnest money if you are planning a real estate purchase. If you need help or have questions be sure to give us a call at the numbers above, or shoot us an email, we will be happy to help you in anyway we can!