Determining Earnest Money Amount
REM #A764
By Ilyce R. Glink
Summary: A ThinkGlink reader is wondering how to determine an appropriate amount of earnest money. Ilyce explains that it is a sign of how serious the buyer is about the property.
Q: When a property is termed "conventional" in the local multiple
listing service, is this based on the type of loan the buyer must ascertain?
And is 20 percent in cash required for a down payment?
Does the down payment have anything to do with how much earnest money you put down as a show of good faith when you put forth the contract?
A: You are not required to put down any specific amount of cash on a down payment.
The earnest money given in good faith is simply that – a show of good
faith. You need to put down enough to give the seller the idea that you're serious.
In some cases, it's $1,000, in other cases, it's $50,000 or even 10 percent
of the purchase price.
Your agent should be able to advise you on what is customary for your area.
But since most of major metropolitan markets currently favor the buyer, and
sellers are desperate to sell in many cases, they may settle for a modest earnest
money deposit. But the less money you put down, the more nervous the seller
will be that you might not have the will or the means to go through with the
purchase of the property.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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