The Ultimate Home Buyer's Guide

EARNEST MONEY

In the last section, we mentioned something about how much you will be putting down.

There is a difference between how much you are putting down in total (your down payment) for mortgage purposes and how much you are putting down when you make an offer.

When you make an offer on a home, you will also put some money in escrow, called “earnest money” or a “good faith deposit”, sometimes called the Initial Earnest Money Deposit (IEMD).

This money is held by a third party, not the seller. It does not just go into the seller’s bank account or pocket. Instead, it is held in an escrow account by the escrow/title company. In Hawaii, title and escrow are usually managed by the same company.

Some buyers get concerned that this money is at risk if something goes wrong. It is not. Unless, of course, you do something really bad, like break the terms of the contract. But you and your money are protected in many ways, and if the deal does not close, that money will be returned to you.

If the deal does close, that money will be applied to the purchase.

In our area, the most common amount for a buyer to put down as earnest money is $1,000-$20,000. But it varies depending on many factors. We can chat about how much you should put down as a good faith deposit once we assess the situation on a home you are making an offer on.