ShareThisHow Much Earnest Money Deposit Do You Need!
I normally recommend that a buyer put no more than 1% earnest money deposit down when submitting an offer. If the offer price is $200,000, than the earnest money deposit should be $2,000. This is my rule of thumb, there is no set amount. My responsibility is to limit my buyers’ financial exposure. When an offer has been accepted the earnest money deposit check is put in my or the listing agent escrow account. The only way the earnest money can be released from escrow is 1. The buyer settles on the property. 2. The buyer and seller signs a written release stating whom receives the deposit. 3. If their is a dispute between the buyer and seller and the Broker feels the buyer was not at fault and sends out a Broker letter to the seller explaining why the money should be released to the buyer and the seller doesn’t respond to the letter in 30 days the Broker can release the earnest money deposit to the buyer. 4. Court order.
I do not recommend that a buyer put a very large earnest money deposit with an offer (unless you are purchasing a high price property) because a dispute between a buyer and seller can cause a delay in the buyer getting their earnest money deposit back quickly. If a buyer writes a $5,000 earnest money check and have to fight to get it released it could take months and that can affect their ability to purchase another property immediately.
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