When you put your house up for sale, you will probably start getting calls quickly for showings. After showing the house a few times or many times, you may receive an offer. When the buyer puts in an offer on your house, he or she will also put money up front with the offer, and this is called earnest money. Here are three things to know about this money that the buyer puts down.
Why buyers put down earnest money
The main reason a buyer must put money down when making an offer is to show his or her commitment to the offer. Earnest money, in other words, shows the seller that the buyer is serious about purchasing the home. Most real estate agents will not even write up offers without earnest money, so you should be prepared for a person to put some money forward when you receive an offer. You will not actually receive this money when the buyer puts in the offer, but you will at a later point in time.
The amount they will put down
While the amount can vary, it is fairly common for a buyer to put down 1% to 2% of the purchase price. For example, if you are asking $200,000 for your house, the buyer might put down $2,000 to $4,000. In some cases, buyers will put down as little as $500, though, but there are also times when buyers may put down more money. You can talk to your agent about this, and you can even request a certain amount if you would like to.
The end results of the earnest money
The earnest money the buyer offers is placed in an escrow account while you and the buyer are working out the details of the purchase. If the deal goes through, the earnest money will be included in the down payment the buyer makes, and you will eventually receive all the money you make from the house. If the deal falls through, it may go back to the buyer, or you might receive it. The answer to this will depend on why the deal fell through.
If the buyer simply changed his or her mind about buying your house, you can keep the money. If you failed to follow through with a contingency, the buyer will get the money back.
If you are ready to list your home so you can sell it and move to a different house, contact a business like Berkshire Hathaway HomeServices Lynch Realty to learn more about listing your home for sale.