What Is Earnest Money?
You will be asked to come up with what is known as “earnest money” to show just how serious you are about buying the home once you have made your offer. This deposit money is given to the seller and applied against the down payment. If the sale does not go through then the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable. For example, if you cannot get a mortgage then the earnest money will be returned in full if the offer stated such a contingency. However if you decide for some reason that you want another home you could end up forfeiting your earnest money in full.
Earnest money is is a sum paid by a potential purchaser as proof of her intention to complete the purchase transaction. Held in trust, usually by the listing agent or directly by the seller in an FSBO situation, the money basically shows that you indeed intend to purchase the home and that you are not wasting the seller’s time since he or she will be forced to take the home off the market as soon as it is under the contract.
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