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.
The Earnest Money process is shown below.
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.
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.
- Discuss earnest money amount – with your real estate agent discuss what amount of Earnest Money will likely be required with (or shortly after submitting) your offer.
- Prepare to have earnest money accessible for offers – Make sure you have access to the earnest money. If you're using gift money, make sure you talk to your lender and get the proper documentation for your gift. Make sure it is in an account you can easily access should an offer be accepted.
- You’ll usually need this right after an offer is accepted
- In some unusual cases you might need it when making the offer
- In most cases we’ll use the Alternative Earnest Money Deadline
- Alternative Earnest Money Deadline is written in the contract
- I usually make it 2 days after the offer is accepted (MEC + 2 Days)
- Usually a personal check
- Sometimes the may request certified funds
- Once offer is accepted you and I will coordinate getting it to the Earnest Money Holder
- Often this is the Seller’s Brokerage or a Title Company
- Once we give it to them, we will get an Earnest Money Receipt
Once you lined up your Earnest Money you can work on your Down Payment.
The following are improvements I plan to make to this page based on some of my Standard Process Improvement Questions.
- Consider making dynamic process charts.
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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.