As you prepare to purchase a home, it’s crucial to familiarize yourself with various real estate terms, including “Earnest Money Deposit.” This deposit is a sum of money provided by the buyer to the seller as a show of good faith and commitment to the purchase agreement. It demonstrates the buyer’s seriousness about purchasing the property.
The Earnest Money Deposit (EMD) serves as a significant part of the home purchasing process, indicating the buyer’s commitment to buying the property and temporarily taking it off the market. When presenting an offer, the EMD amount is typically specified, and upon seller agreement, the buyer promptly pays it through their real estate agent.
Here’s a breakdown of key points regarding the Earnest Money Deposit:
1. Escrow Holding:
Upon payment, the EMD isn’t immediately handed over to the seller. Instead, it’s placed in escrow, typically managed by the attorney or firm handling the contract. It remains in this separate account until the final contract is completed.
2. Release upon Completion:
Once all final contracts are signed, and ownership of the property is transferred, the EMD is released from escrow and given to the seller, along with the rest of the proceeds from the home sale.
3. Refundability:
Whether an EMD is refundable or nonrefundable is stipulated in the offer to purchase. Refundable EMDs are returned to the buyer if the deal falls through due to various reasons such as unsatisfactory home inspection results or failure to secure financing. Nonrefundable EMDs, however, are retained by the seller regardless of the deal’s outcome, providing them assurance even if the buyer withdraws from the agreement.
