How much earnest money

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Information about good faith deposit or earnest money.

When you make a purchase offer, it is usually required as a token of good faith for earnest deposit to be made. This money shows your desire to purchase the property, how much earnest money depends on a lot of factors.

The amount you provide in earnest really depends on how bad you want the home and how many other offers are on that property. As a general rule, we recommend as little as possible. The world is full of stories about people who have lost thousands of dollars in earnest money, so we tell our clients, " no more than neccessary". Historically, $500 to $1000 is more than enough, and in today's market you can almost get away with nothing. Although putting something in the pot is always the right decision, because it will motivate the seller to accept your offer, versus an offer without one. This really applies when your asking for improvements or discounts from the seller, as it shows your intent on really following through on the deal.

Risks with earnest money

There can be risks in a transaction. If you fail to close the transaction on time, or fail to hold up your end of the deal in some way specified by the purchase agreement, then you run the risk of loosing your earnest money deposit. So as a even better rule, try not to put any more money than your willing to loose or can afford to loose. You could also find a better house during the process and decide to walk away, it might be worth loosing the $500 you have deposited with the seller to get the home you really want.


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