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!

42 Properties
Page 1 of 4
$6,495,000
Neighborhood: Snow Park Subdivision
5
Beds
5
Baths
5,700
Sq.Ft.
2007
Year Built
1
Day on Site
12202065
MLS
Ideally located in Old Town and a short walk to Lower Deer Valley, enjoy the open floorplan and views from this private location. Designed around the views and the undevelopable lot next door, enjoy...
$2,495,000
Neighborhood: Pendry Residences Park City
2
Beds
2F11/2
Baths
1,399
Sq.Ft.
2021
Year Built
1
Day on Site
12202679
MLS
Privately perched above the Pendry plaza, this fully furnished 2BR penthouse is a great place to unwind at the Pendry Park City. Offering some of the best ski and mountain views from a 2BR at the...
$975,000
Neighborhood: Heber City
6,625
Sq.Ft.
2023
Year Built
1
Day on Site
12204033
MLS
Calling all investors, business owners, outdoor enthusiasts, hobbyists, and car collectors! Mountain View Commons is ideally located in the fast growing Heber Valley at the highly visible...
$1,050,000
Neighborhood: Heber City
6,625
Sq.Ft.
2023
Year Built
1
Day on Site
12204034
MLS
Calling all investors, business owners, outdoor enthusiasts, hobbyists, and car collectors! Mountain View Commons is ideally located in the fast growing Heber Valley at the highly visible...
$975,000
Neighborhood: Heber City
6,625
Sq.Ft.
2023
Year Built
1
Day on Site
12204035
MLS
Calling all investors, business owners, outdoor enthusiasts, hobbyists, and car collectors! Mountain View Commons is ideally located in the fast growing Heber Valley at the highly visible...
$3,950,000
Neighborhood: Snyders Addition
4
Beds
2F11/2
Baths
2,661
Sq.Ft.
2016
Year Built
2
Days on Site
12204018
MLS
This newly built mountain-modern luxury home is located in the heart of Park City's historic Old Town neighborhood. Offering the convenience of a short walking distance to skiing at the base of Park...
Open 10/8
2594 E Red Knob Way Heber City, UT 84032
$2,595,000
Neighborhood: Red Ledges
4
Beds
4F11/2
Baths
3,947
Sq.Ft.
2015
Year Built
2
Days on Site
12204019
MLS
OPEN HOUSE THIS SATURDAY, OCTOBER 8th FROM 1:00 PM TO 4:00 PM. Beautifully designed Mountain Modern Cottage on the Red Ledges Jack Nicklaus 18 Hole Golf Course. Spectacular view of the 18th Fairway,...
Open 10/5
6633 Lookout Dr Park City, UT 84060
$4,750,000
Neighborhood: Lookout At Deer Valley
5
Beds
4F11/2
Baths
5,843
Sq.Ft.
2007
Year Built
2
Days on Site
12204020
MLS
Enjoy the spaciousness & privacy of a single-family home without the hassle! This luxury townhome is a celebrity favorite during the Sundance Film Festival and can accommodate 13 guests. With dual...
Open 10/4
160 E 200 South Heber City, UT 84032
$1,200,000
Neighborhood: Heber City
5
Beds
3F11/2
Baths
3,906
Sq.Ft.
2001
Year Built
2
Days on Site
12204021
MLS
This impeccable home has an open floor plan and a stunning sun-filled great room with vaulted ceilings, wood flooring, and a gas fireplace. The captivating outdoor living space includes a fully...
Open 10/5
900 W Bitner Rd Rd Park City, UT 84098
$433,500
Neighborhood: Canyon Creek
1
Beds
1
Baths
802
Sq.Ft.
1997
Year Built
2
Days on Site
12204022
MLS
This lovely remodeled 1 BR sits like a tree house. Private and quiet. New vinyl plank flooring, carpet and paint. Does include washer, dryer, kitchen appliances, window air conditioner, ceiling...
$419,900
Neighborhood: Prospector Square Condos
1
Beds
1
Baths
315
Sq.Ft.
1978
Year Built
2
Days on Site
12204016
MLS
Better than New Prospector Studio. This well thought out design comes fully furnished! The custom finishes, NEW Mini split A/C (no ugly furnace in the wall), added fireplace, custom lighting and cozy...
$2,150,000
Neighborhood: Jeremy Ranch Area
5
Beds
3F11/2
Baths
4,641
Sq.Ft.
1994
Year Built
2
Days on Site
12204024
MLS
Nestled in a sought-after location, the versatile floorplan and flat backyard of this residence offer supreme livability within the Jeremy Ranch neighborhood. Surrounded by mature trees, multiple...

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