Do You Have to Put Up Earnest Money?
In Clarksville TN, buyers ask this question and I have heard agents in the area say, that it isn't needed because buyers can always get it back. That is not always the case. Let's look at the facts.
Do you have to put down earnest money? No, earnest money is not mandatory to submit an offer or get one accepted. It does show a seller that your offer is serious and that you have some skin in the game. Some people refer to it as good faith money or escrow deposit. When you think of it that way, it makes an offer seem stronger.
Why? With no earnest money how can the seller believe you are serious? I had one buyer make an offer on a $550,000 new home. The seller thought the buyer was crazy and could not afford to buy the house. That was the message that the buyer sent by not offering earnest money. If the buyer's offer was accepted and he should change his mind and default, what would he lose? Nothing!
Can it be a small amount? The seller ultimately decides what he is willing to take. In some markets or price ranges, a little bit gets the job done. If you are in a multiple offer or highly competitive market, strong earnest money can make the difference in whether your offer is taken seriously and accepted or not.
Can I write a post dated check? Again this depends. If it is for a few days out just so you can transfer funds then it is acceptable but the seller would have to be advised. If it is for several days out or weeks then it would be conveying a message to the seller that you don’t have ready cash and may not be financially prepared to purchase their home. Either way, the seller makes the decision whether this was acceptable to him or not.
But you say the seller will get all his money in the end. I understand that, so why not show how strong of a buyer you are by putting a large amount of earnest down with the offer? If you really want the house, it makes a statement, a good statement.
Can you get it back if you don't qualify? There are contingencies written in contracts and if any of these are not satisfied, then the earnest money would not be forfeited. It will be returned to the buyer.
What if you change your mind? If you have been fully approved and then default, it will be forfeited and usually goes to the seller as damages. Our state contract also says the seller has rights under the law to pursue other legal action against you as well.
Is the check cashed? Yes, it will be immediately put into an escrow account awaiting the closing of the property. At the closing the monies will be credited to your side of the transaction reducing the amount you need for closing costs and purchase price.
If you have more questions about the home buying process, contact The Real Debbie Reynolds of Clarksville TN. 931-320-6730.
2130 Wilma Rudolph Blvd.
Clarksville, TN 37040
it would be my pleasure to assist you!
"The Real Debbie Reynolds"
931-771-9070 Office | 931-320-6730 Cell