What is Earnest Money in a real estate transaction?

The Barr Team First Time Homebuyer Info, Info for Home Buyers, Info for Home Sellers, Info on Real Estate Transactions, Uncategorized 0 Comments

In this video Henry explains what earnest money is, when it is needed and in what amount…
Hi this is Henry Barr with The Barr Team here at Re/Max Properties of the Summit in Frisco Colorado. Some people have asked me “What is earnest money?”. Earnest money is the amount of money that is presented when somebody presents an offer to the listing broker to show the sincerity of the offer and that you are earnest about your offer and sincere and that you want them to consider your offer. It is also considered consideration in a contract so it is of importance that it be presented when it is supposed to be. Now the newer contracts in Colorado allow it to be presented within a short time frame after the offer is accepted. That’s new in the last five years or so, but that is acceptable as long as you write in the contract when it is due. Earnest money varies in amount and theories. Earnest money is usually 1%-2% of the purchase price. It can vary though and depends on what the Seller is willing to accept for earnest money, which is really what decides how much earnest money is needed. Check with your local Broker on how much earnest money is expected on the property that you are looking at buying. Key question that comes up is about whether earnest money is refundable or not, the normal is that earnest money is refundable if you provide for it in those paragraphs in the contract that allow for earnest money to be returned upon the following items happening…normally it would happen when a Buyer has a right to an inspection during their due diligence and on five or six other key items in a contract. If the buyer objects during that time frame and terminates the contract within their legal rights to terminate, then the earnest money is refundable. So that’s the norm, there are a lot of exceptions to that however. Call us for more information on this or with any other real estate questions that you might have.