The Ultimate Guide to Earnest Money

During: Buying Process Overview: Pre-Showings: Earnest Money

Earnest Money is all about being ready for earnest money when you make an offer to buy. It is the third step in the Pre-Showings process.

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Check out the Earnest Money process and a comprehensive video below.

Earnest Money Class Recording

This class was taught on October 22, 2020 by James Orr with Brian Williams.

Topics covered in the video:

Are Earnest Money Deposits Refundable?

Often times yes, but ultimately your paperwork (contract) will determine whether it is or not, under what cases it is or isn't and through what date it is or is not refundable.

Are Earnest Money Checks Cashed?

Earnest money checks are almost always cashed unless you have a special agreement with the earnest money holder. If your earnest money is not cashed that would be an exceptional and highly unusual situation.

Are Earnest Money Deposits Required?

In almost all cases, an earnest money deposit will be required with your offer to buy real estate. With the notable exception being if you are able to convince a for-sale-by-owner seller into accepting your offer without earnest money.

Earnest money will almost always be required if you are making an offer on a property listed in the Multiple Listing Service.

Is Earnest Money Part of Down Payment?

Yes… your earnest money typically is considered part of your down payment to purchase the property. So, you don't need the earnest money amount and, additionally, money for down payment. Instead, it reduces the amount you'll need for down payment or closing costs at closing by that amount.

  • Is Earnest Money Returned?
  • Can Earnest Money Be a Gift?
  • Can Earnest Money Be a Personal Check?
  • Can Earnest Money Be Cash?
  • Can Earnest Money Be Used for Closing Costs?
  • Can Earnest Money Be Paid by Debit Card?
  • Can Earnest Money Be Paid by Credit Card?
  • What's Earnest Money?
  • What's Earnest Money When Buying a House?
  • How Much Earnest Money to Put Down?
  • How Much Earnest Money Is Normal?
  • How Much Earnest Money to Offer?
  • When Is Earnest Money Forfeited?
  • Who Gets Earnest Money When Buyer Backs Out?
  • How Do Earnest Money Disputes Work?
  • What About Earnest Money With Nothing Down Deals?
  • What About Earnest Money With Off-Market Deals?
  • Plus, much more…

Checklist

The following are parts of the Ultimate Nomad Checklist™ related to Pre-Showings: Earnest Money.

Discuss typical amount of Earnest Money with Real Estate Broker

Discuss the typical amount of Earnest Money with your Real Estate Broker.

In Northern Colorado, Earnest Money is typically about 1% of the purchase price of the property but is negotiated between Buyer and Seller.

However, offering less Earnest Money than the Seller is requesting on the MLS listing is typically considered a weaker offer.

If you're buying a property with little or no money down (especially less than what Earnest Money would be), discuss with your Real Estate Broker some possible strategies for trying to get an offer accepted in this situations. It may be harder to get your offer accepted in these situations so you may need to be more flexible in the homes you're looking at until we find a more flexible Seller.

Mark this task done when complete.

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Determine the source of your Earnest Money

You will need Earnest Money at the time you make your offer. It can vary and is negotiated but it is typically about 1% of the purchase price of the property you're going to buy. Earnest Money typically does count towards your Down Payment.

For a $300,000 property, that means you'll likely need about $3,000 for Earnest Money at the time you make your offer. Do you know where those funds are and are they readily accessible?

Discuss this with your Real Estate Broker if you have additional questions or concerns.

Mark this task done when complete.

ASAPEarnest MoneyFinancingMaking OffersPre-Showings: Earnest MoneyUltimate Nomad ChecklistWeek 2

Once you lined up your Earnest Money you can work on your Down Payment.

IMPORTANT NOTE: This checklist is based on what I personally use with clients in Northern Colorado. Please rely on your local real estate agent for how it works in your local real estate market. This process will definitely vary in different States.

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