Do I Need Earnest Money When Buying a Home?

What is an earnest deposit when buying a home and why do we need to do it?Do I Need Earnest Money When Buying a Home

What is earnest money? Depositing earnest money is an important part of the home-buying process. It tells the real estate seller you’re in earnest as a buyer, and it helps fund your down payment. The earnest money check is typically cashed and held in a title company trust account, or in the broker’s escrow account. You get a receipt from your brokerage when you hand in the earnest money.

Without the requirement of earnest money, a real estate buyer could make offers on many homes, essentially taking them off the market until they decided which one they liked best. Sellers rarely accept offers without the buyers putting down earnest money to show that they are serious and are making the offer in good faith. Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, the earnest money is just paying more of the down payment and closing costs upfront. In many circumstances, buyers can get most of the earnest money back if they discover something they don’t like about the home.

The amount you’ll deposit as earnest money will depend on factors such as policies and limitations in your state, the current market, what your real estate agent recommends, and what the seller requires. On average, however, you can expect to hand over 1% to 2% of the total home purchase price.

In some real estate markets, you may end up putting down more or less than the average amount. In a market where homes aren’t selling quickly, the listing agent may note that the seller requires only 1% or less for the earnest money deposit. In markets where demand is high, the seller may ask for a higher deposit, perhaps as much as 2% to 3%. Your real estate agent may recommend that you are more likely to win a bid if you give the seller a large deposit. In fact, the seller may be willing to negotiate on the purchase price a little if you make a bigger good-faith deposit.

On the other hand, you may not want to put too much earnest money down. Coming up with that much money, and losing the use of it for weeks or months before the sales contract closes, may not be the best use of your cash. However, you may wind up having to do some paperwork for your mortgage lender, and the bank may want to verify the source of the funds for larger deposits of earnest money. It won’t be a problem if you can show that you’ve had the money for at least 60 days.

We would love to answer any questions you have about buying a home in Park City, Luxury home purchases or the details of the purchase and sale contract. Contact us today!

Check out the latest listings for our area!

43 Properties
Page 1 of 4
Open 2/1
1406 W Meadow Loop Rd Park City,  UT 84098
$2,200,000
Neighborhood: Meadow Springs
3
Beds
2F23/4
Baths
2,460
Sq.Ft.
1988
Year Built
2
Days on Site
12300273
MLS
Beautiful home in Silver Springs offering 3 bedrooms and 4 baths plus large lower level den with adjoining office space. Extensive main floor remodel includes opening up the living space bringing in...
Open 2/1
1618 Redstone Ave Park City,  UT 84098
$850,000
Neighborhood: Fox Point At Redstone
3
Beds
2
Baths
1,261
Sq.Ft.
2003
Year Built
2
Days on Site
12300277
MLS
Great opportunity to own a coveted south facing top floor Fox Point condo. Perfect for an owner-occupant or investment! Nightly and Long-Term Rental approved (has never been in rental pool). Enjoy...
$599,950
Neighborhood: Brookside (Heber)
3
Beds
3F11/2
Baths
1,954
Sq.Ft.
2023
Year Built
2
Days on Site
12300278
MLS
Duplex building. Finished basement included! We have new lots available where construction will start in March 2023! These townhomes will have a small private landscaped yard to enjoy. (Fencing is...
$750,000
Neighborhood: Wheeler Park
5
Beds
3
Baths
2,974
Sq.Ft.
2014
Year Built
2
Days on Site
12300279
MLS
Beautiful 5 bedroom family home in the highly desired Wheeler Park community Only minutes away from Park City, Deer Creek and Jordanelle. This property is so close to everything outdoors: Skiing,...
Open 2/1
7065 Powderhorn Ct Park City,  UT 84098
$5,150,000
Neighborhood: Lookout Ridge
4
Beds
1F33/411/2
Baths
5,288
Sq.Ft.
2021
Year Built
2
Days on Site
12300280
MLS
Introducing 7065 Powderhorn! This is a 2021 New Construction home by Aecum Development in the sought after Neighborhood of Lookout Ridge in Promontory Club. The location provides stunning Wasatch...
Open 2/1
2417 W High Mountain Rd Park City,  UT 84098
$6,975,000
Neighborhood: Pendry Residences Park City
4
Beds
2F43/4
Baths
3,691
Sq.Ft.
2022
Year Built
2
Days on Site
12300283
MLS
This Signature Penthouse Residence is Pendry's most spacious and opulent residential accommodation, more than 1,000 sq.ft. larger than any other residence in the building! This slopeside getaway...
$1,550,000
Neighborhood: Shoreline
3
Beds
3F11/2
Baths
3,030
Sq.Ft.
2023
Year Built
4
Days on Site
12300269
MLS
All Pre sheetrock options included.Buyer can still select all the Finish options.Call and set up a time to come in or just stop by we would love to show you how great Shoreline is.All photos are of...
$969,000
Neighborhood: Heber City
5
Beds
3F11/2
Baths
3,656
Sq.Ft.
1998
Year Built
4
Days on Site
12300270
MLS
Beautifully landscaped open floor plan rambler with unobstructed views of the Heber Valley and surrounding mountains, including Mount Timpanogos! The property behind is designated open space and the...
$1,325,000
Neighborhood: Blackstone Flats
2
Beds
1F13/4
Baths
1,160
Sq.Ft.
2019
Year Built
5
Days on Site
12300248
MLS
This modern ground-level unit is perfect for a year-round residence or seasonal ski getaway. It offers an expansive living space with tall ceilings and large windows which allow for tons of natural...
$1,525,000
Neighborhood: Blackstone Flats
2
Beds
1F13/411/2
Baths
1,160
Sq.Ft.
2019
Year Built
5
Days on Site
12300249
MLS
This contemporary ski condo is located on the top-floor of Blackstone Flats. It is offered turnkey and features an open floor plan with spacious living area, high ceilings, expansive windows allowing...
$4,500,000
Neighborhood: Resort Center
4
Beds
4
Baths
2,713
Sq.Ft.
1985
Year Built
5
Days on Site
12300231
MLS
This is a unique opportunity to own the incredibly rare 4 bedroom ski in/out presidential suite at Park City Resort. The unit features amazing ski run views, two primary suites, 4 full bathrooms, 4...
$50,000,000
Neighborhood: Colony At White Pine Canyon
6
Beds
2F63/431/2
Baths
17,567
Sq.Ft.
2022
Year Built
5
Days on Site
12300255
MLS
Presenting ''Monitor's Rest'', winner of the distinguished Robb Report Best of the Best award for 'Best Amenities'. Nestled mountainside at the base of Monitor Bowl on Park City Mountain Resort, this...

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