ladylpk74 wrote:I have a few questions:1. What exactly is it used for?2. Are all buyers required to put it up? If so how much?3. At what point does this transaction take place?4. Is it refundable if the deal falls through?5. Who holds on to this money?6. Is it applied toward the down payment or closing costs?Can you tell I am a first time home buyer? I just want to know as much as I can before I start the home buying process. Thanks.
1. Earnest Money Deposit, also known as EMD, is used when signing a contract to show the seller that you are serious in purchasing their house. Anyone can go around signing contracts, but if you have money invested via EMD, no matter how little, it shows the seller you have every intent of buying the house and not wasting either their time or yours.
2. Usually yes, although working in real estate I have seen some buyers who didn't (I know there are some agents on this forum please correct me if I'm wrong! )
3. EMD is usually given right after signing the contract.
4. No, unless there is a contingency clause in the contract stating which circumstances would allow it to be refundable.
5. The buyers agent does, unless you don't have one and then it can either go to the seller, sellers agent, or title company.
Hope that helps!
househunting wrote:Following up on #6 - does the earnest money go to downpayment OR closing costs?In other words, if I put up $3500 in earnest money, would that go toward paying my closing costs, or be put into my downpayment pot for PMI calculation, etc?Thanks!