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!

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82 Properties
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5
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3F11/2
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4,548
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2005
Year Built
2
Days on Site
12201942
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This gorgeous home is a jewel of the Kamas Valley. The five large bedrooms give everyone the perfect place to retreat with privacy, and the large kitchen, great room, dining, oversized patio and deck...
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4F11/2
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5,995
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2010
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2
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12201943
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It is not often a home comes to market that has forever been the envy of a neighborhood. This is your opportunity to own an amazing home, in an amazing community, with an amazing view. Located in...
$1,025,000
Neighborhood: Cottages At Canyon View
3
Beds
2F11/2
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2,500
Sq.Ft.
2019
Year Built
2
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12201948
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Incredible mountain views in three directions from your expansive back patio. Access world class skiing at Deer Valley just minutes away. Park City Mountain and Sundance Resort are only a 25-minute...
$3,400,000
Neighborhood: Skyridge
4
Beds
4F23/4
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4,768
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2022
Year Built
2
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12201949
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Lot #64 - Stunning Lake and Mountain Views from a coveted downhill homesite in the Ursa Subdivision of SkyRidge Mountain Community. Mountain contemporary design located on the northwest shore of the...
$6,100,000
Neighborhood: Knoll Estates/Deer Valley Club Estates
6
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3F23/411/2
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5,820
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1996
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2
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12201950
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Remarkable Opportunity in the private gated Knoll Estates Silver Lake Village. This Deer Valley Property provides a short walk to Utah's most amazing skiing, hiking, biking, and several 5 star...
$3,900,000
Neighborhood: Wild Mare
6
Beds
6F21/2
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7,457
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2018
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2
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12201951
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Beautiful Modern Farm House situated on 5+ acres of horse pasture and hay fields with Irrigation water shares! This is a home that truly offers it all! This home also includes an enormous 40' X 60'...
$7,599,000
Neighborhood: Utah Area
7
Beds
7F31/2
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12,931
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2003
Year Built
2
Days on Site
12201953
MLS
Imagine coming home down a private lane that leads to your own secluded, gated estate with a heated paver driveway surrounded by massive mature pine trees and a fully fenced yard for kids and/or...
$2,590,000
Neighborhood: Red Ledges
4
Beds
4F11/2
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3,571
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2014
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2
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12201954
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Traditional custom home in Red Ledges overlooking the 5th fairway at the Jack Nicklaus Signature Golf Course. Come and see this beautiful four bedroom 4.5 bath custom home designed by Kevin Price....
Open 5/25
14054 N Council Fire Trl Kamas, UT 84036
$750,000
Neighborhood: Black Rock Ridge
2
Beds
2
Baths
1,283
Sq.Ft.
2007
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2
Days on Site
12201955
MLS
Location, convenience, trails and a car and toy lovers delight. Have you ever dreamed of a condo with a huge garage? You know you have. This stellar pad has what you want to make your Park City area...
$800,000
Neighborhood: Swiss Alpenhof
6
Beds
5
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5,521
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2019
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2
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12201956
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Wonderful opportunity to customize this stunning Midway 2 Story home. Situated on lot 19 in Alpenhof Estate, a very sought after neighborhood in beautiful Midway. This home is being offered as is...
$1,070,000
Neighborhood: Greyhawk
2
Beds
2F11/2
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1,285
Sq.Ft.
1997
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2
Days on Site
12201959
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Looking for a great central location with easy access to Deer Valley, Park City and all the fun in Old Town? Check out this well maintained, updated. 2 bedroom, 2 1/2 bath condo at Greyhawk. The free...
$1,350,000
Neighborhood: Swiss Mountain Estates
5
Beds
4
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5,533
Sq.Ft.
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2
Days on Site
12201960
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Scotch Fields is a development of 89 home sites in the Northwest corner of Midway near the entrance to Wasatch State Park and Golf Course. There are walking and biking trails throughout the community....

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