Several Buyers have asked me lately WHY they have to write an earnest money check when submitting a contract or they question why it is cashed prior to closing.
An earnest money deposit is to show the Buyer's sincerity. Period. Once all the terms of the contract (sales price, repair cap, closing date, etc.) are agreed upon by all parties, the Seller will take his property off the market, the Realtor will discontinue marketing the property and the earnest money is deposited -- usually in the Listing Realtor's escrow account.
Should problems arise with financing or inspection results, the earnest money could be refunded to the Buyer. And of course the earnest money amount is credited towards the Buyer's closing expenses.
The point of earnest money is to show the Seller that you are sincere in your intention of purchasing his property and moving forward in a diligent manner to ensure a successful transaction. I usually ask my Buyer's to write a check for 1% of the sales price for the amount of earnest money.
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Lori is a residential Realtor with Chinowth & Cohen Realtors serving the greater Tulsa area and specializing in downtown Tulsa and midtown Tulsa real estate.
Lori,
Thanks for the info. Your posts have been very informative in this whole daunting process of buying a house.
Tamya, call me if you have ANY questions! Have you found the perfect house/condo yet? Hugs, Lori