Oro Valley Real Estate - Earnest Money
Earnest money is a deposit a homebuyer pays to a home's seller as a show of good faith. The amount you'll pay for earnest money varies, but typically it's 1% to 5% of the home's purchase price.
The deposit isn't paid directly to the seller. Instead, it's held in an escrow account, usually with the seller's escrow company.
Once the home's purchase is finalized and the buyer and seller have agreed to any contingencies, the earnest money deposit is credited toward any closing costs associated with completing the sale.
Why Sellers Require Earnest Money?
Earnest money offers a measure of protection to the seller in case the contract falls through under circumstances not covered by a contingency. That money could be used to compensate the seller for any costs associated with a failed sale.
Is Earnest Money Refundable?
While earnest money can protect the seller, it's also important to protect yourself as the buyer. That's where including contingencies in your home offer contract comes into play. Contingencies can allow you to get your earnest money deposit back if you end up not buying the home.
Some of the most common contingencies include:
Unable to get financing
Serious structural or repair issue
Property Title problems
When Earnest Money Isn't Returnable?
Broadly speaking, that includes any situation not covered by contingencies, including change of mind or plans.