What is Earnest Money?
Like the video shows, earnest money is money you put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price though the amount can vary with local customs and conditions. If your offer is accepted the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your earnest money is returned to you. If you back out of a deal, you may forfeit the entire amount.
An earnest money deposit is not a legal requirement for a valid contract. The signed offer to purchase delivered to and accepted by the seller is sufficient to form a valid contract. However, payment of an earnest money deposit is required by most sellers and is customary in Georgia and most other states.
Earnest Money is typically required to be deposited at the beginning of a sales contract and is held in a Brokers Escrow account or an Attorney's Account.
EARNEST MONEY AS LIQUIDATED DAMAGES - The contract might specify that if the buyer fails or refuses to close the transaction, the earnest money becomes compensation to the seller and/or seller’s agent, the listing broker. The earnest money clause in the contract might also identify the earnest money as funds that the seller may retain as partial liquidated damages while maintaining the right to pursue seller’s other remedies at law or equity.
Have more questions about purchasing a home - you can check out our other videos and tips at Welcome Home Tips - Video Library or you can call us at 470-407-3150
Listing information last updated on July 10, 2020 at 2:00 PM EST.