Understanding earnest money is crucial for buyers in the Utah real estate market. The Stern Team, top real estate agents in Salt Lake City, explains its importance.
What Is Earnest Money?
Earnest money is an upfront deposit made by buyers to show commitment to purchasing a home. It assures the seller of your intent. A neutral third-party holds this money until the deal is completed or terminated.
Purpose of Earnest Money: It demonstrates your seriousness as a buyer. If the deal goes through, it applies to your down payment. If you back out without a valid reason, the seller may keep it.
Amount of Earnest Money: Typically, it ranges from 1% to 3% of the home’s price. For a $300,000 home, this would be $3,000 to $9,000.
Is It Required?
While not always required, it is customary and crucial in competitive markets to strengthen your offer.
Payment and Handling: Earnest money is usually paid within three days of signing a contract and held in an escrow account by a third-party. Payment is typically made via cashier’s check or wire transfer.
Refunds and Forfeiture: Earnest money is refundable if certain contingencies in your contract are not met, like failing a home inspection. If you back out without a valid reason, you may forfeit the deposit.
Protect Your Deposit: Ensure all terms are in writing, understand your contingencies, and use an escrow account.
The Stern Team offers expert guidance throughout the buying process. Have questions? Reach out to the Stern Team!
