Don’t know what an earnest money deposit is, or don’t really understand how it is used in a real estate transaction? The FOCUS on NoVA Real Estate team breaks it down for you.
When you get involved with purchasing a home you are going to have a lot of jargon that’s thrown at you that you may have never heard before. One of the items in the contract is the earnest money deposit.
The earnest money deposit is a good-faith offer that you’re giving up front with your contract. It is a lump sum of money that is put in escrow as a good-faith deposit to purchase the home.
When trying to decide the amount to put down for an earnest money deposit you really want to make sure that it’s equivalent to the property, typically you’re going to see anywhere from 1 to 3% of the asking price.
Once your contract is ratified usually within three to five days you have to either wire money or write a check to an escrow account and that money is going to be held. It is money that you need upfront in a transaction but the earnest money deposit is not an additional fee. This money goes is applied to the closing costs at the time of this settlement.
What happens if the deal doesn’t close? The answer: it depends.
If for some reason a contract is voided and it is not breach of contract due to the buyer you have a very good chance of getting your earnest money deposit back. If the buyer is in breach of contract for some reason that’s where the money is up for debate. The money could potentially stay with the seller due to their distress of having to put the money house back on the market and time that they have lost but that’s when a real estate lawyer is going to get involved. If the contract is voided through a contract being voided due to contingencies, appraisal, homeowner or condo docs then typically the earnest money deposit would go back to the buyer.
If you have any questions about Northern Virginia real estate, reach out as we are happy to help.
