| Every home buyer loves the process of visiting | | | | A few years back, a potential buyer wanted to |
| homes and finding that perfect place to call home. | | | | put down $100 earnest money on a $300,000 |
| Sitting down and writing the offer is not always | | | | home I had listed. The seller was not impressed |
| as much fun! For many people, the process of | | | | and felt it was an unreasonable amount as the |
| buying a home is something they go through only | | | | buyer could easily walk away from the deal with |
| once or twice in a lifetime. New terms and | | | | only $100 at risk. |
| questions come are the norm as the purchase | | | | Generally the earnest money funds are in the |
| agreement is prepared. As a Realtor in the | | | | form of a check. That money is deposited into |
| northeast Twin Cities metro, whether I am | | | | the listing broker's trust fund or escrow account. |
| working with first time buyers, move-up buyers | | | | In Minnesota, the funds must be deposited within |
| or empty-nesters, one question always stops the | | | | 3 days of an offer having been accepted in |
| process for a moment of discussion. How much | | | | writing. Yes, this does mean that the check will be |
| earnest money are you prepared to offer? | | | | cashed in 3 days or less! |
| The amount of the earnest money varies with | | | | If the offer is accepted, the earnest money will |
| each purchase agreement. A buyer must first | | | | be applied to the down payment and/or the |
| understand the purpose of the earnest money to | | | | closing fees when the closing takes place. If your |
| determine the right amount to include with the | | | | offer is not accepted the check is not cashed and |
| offer. | | | | the money will come back to you. However, if |
| Earnest money is the funds that a buyer puts | | | | the offer is accepted and the check cashed and |
| down to demonstrate to the seller their | | | | then for some reason all contingencies are not |
| seriousness about buying a home. It should be an | | | | met or other situation arises where the sale does |
| amount sufficient enough to indicate to the seller | | | | not proceed, the buyer does not automatically |
| that the buyer will not walk away from the deal | | | | receive a refund of the earnest money. Nor, does |
| without good reason. In Minnesota this is | | | | the seller automatically keep the down payment. |
| traditionally 1% of the purchase price but it can | | | | Buyer and seller must reach an agreement for |
| be up more. A lower amount can also be | | | | the cancellation of the agreement and |
| acceptable with some offers. However it is | | | | disbursement of the funds. |
| important to be realistic. | | | | |