Where Does My Earnest Money Go?

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted.

According to Wikipedia:

Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.

For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.

In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

  1. Earnest Money is submitted to an escrow company with the accepted purchase contract
  2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
  3. If there are no closing costs or down payment, the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

  • Selling Real Estate Agent – A conflict of interest
  • Sellers – Too risky
  • Buying Agent – They shouldn’t have your money in their account

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March 28, 2010 by · Leave a Comment

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About Carolyn

To give you a little bit about myself I am a veteran of the Real Estate profession. I have been in the mortgage industry for over 20 years, been a licensed Real Estate Professional and am a home owner myself. I have a true understanding of all sides of a purchase transaction and know the importance of communication to all parties to make the deal close. I started my financial career in Seattle with Washington Mutual back in 1991 and have continued to grow in the industry through various aspects of the business. I have had the honor of being on Congressman Bill Posey's Financial Roundtable in 2010 and in 2011. I have been an Underwriter, processor as well as a Mortgage Loan Originator. At Certified Mortgage Planners we have the unique ability to broker our loans as well as a direct lend. What this means for you is we have multiple options to choose from and are a full service lender which allows us to help our clients fit in the best possible financing . My greatest satisfaction in my career is helping people in our community achieve homeownership, whether it is their 1st home, their last home or investment and helping my Realtor partners achieve there goals. What is also important to me is treating people fairly and ethically. I work with people in all price ranges and no matter what the objective is and will be there from start to finish. I feel truly blessed to be a part of such a great business and enjoy the challenges that it sometimes brings.

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