What Should You Know about Earnest Money?

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Today we are talking about the top things buyers need to know about earnest money deposits. This is the money that is paid by buyers after mutual acceptance to prove they are serious about your offer. 

Typically in California, the earnest money deposit is 3% of the purchase price, but varies based on the purchase price as well as the financing. For example, with FHA or VA financing, the earnest money will be less than 3.5%.

Per the contract, the buyer has three days to get the earnest money to escrow. Most of our clients like to wire the money, but if you look at the purchase agreement, you will see you can send a personal check as well. 

The only time the buyer can get their earnest money back is during the contingency period. If it’s not an all-cash offer, the buyer has the opportunity to get their earnest money back with no penalty if there is a major issue with the home. 

Now, if the buyer cancels a few days before escrow just because they found another home they like better, the seller would be able to go after the buyer for their good faith deposit. Once the buyer removes their contingencies, that’s when the deposit becomes at risk. 

If you have any questions about earnest money deposits and how they work in your neighborhood, shoot us a quick email or give us a call.