Hey everybody! It’s Austin Solomon! Welcome to this week’s episode of The Real. It’s going to be a quick episode today, we’re just talking about earnest money. What is it? What is it all about?
So, earnest money, what it is is good faith that a buyer is going to complete the terms of the offer. So when you make an offer on a house, traditionally you either attach earnest money or you say that you’re going to deliver it within a certain amount of time, and that could be 5-7 days.
In the Wausau area, it’s typically about 0.5% to 1% of the purchase price. It tends to be a little bit lower in our area than what I’ve heard for surrounding areas throughout the country. Basically what it says is, “Hey sellers, I’m putting some money down in good faith that I’m going to complete the terms of the offer.” So it might be $500 – $2,500 and you’re telling the seller, we’re putting this money aside and it shows that I’m serious about the house. If the buyer were to back out for no reason, which they can’t do because it is a contract, but if they did, there’d be something there that the seller could hold on to, there’s at least some skin. That’s the thing with earnest money, put some skin in the game.
Traditionally it gets delivered to the listing agent’s office, so the person that has the sign in the yard, that company. It would be held in a trust account. Traditionally with the listing agent’s office or it could be held at the title company as well, so that’s where it’s traditionally delivered.
Then, when the transaction works out and everyone is happy, that earnest money goes to the title company and that is used toward your down payment and closing costs, so you get that money back.
So, that’s what earnest money is. That’s a deep dive. A couple of other small tips and pieces. As a seller, obviously the more earnest money the better. There’s more skin in the game and it shows good faith.
As a buyer, you kind of have to monitor it, you put your earnest money in, you don’t want to put so much in that you don’t have money for your inspection and other things like that. Obviously you have other expenses, but if you put a good amount of earnest money down you’re showing that seller that you’re serious about the house and I’m interested in moving forward and here’s a good faith deposit to show that.
That’s a little bit about earnest money! Hope everyone is doing well! If you guys need anything or have any questions, just reach out. You can call me or text me (715) 212-4693. We’re excited to help. Thanks so much!
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Austin Solomon | The Solomon Group – Coldwell Banker Action – (715) 212-4693