Earnest Money – What is That?

Brian Stites
Brian Stites
Published on January 24, 2019
Video Transcript Below

Well, Hi and welcome back, my name is Brian Stites with Twin Cities Real Estate Guide and RE/MAX Results.

Today we’re going to be talking about what is earnest money?
We’re going to get started right now.

Okay, I get this question a lot from first-time home buyers
and some non-first-time home buyers

and that is what is earnest money? when we’re going over the
purchase agreement.

One of the first items on the line is earnest money.

That is a dollar amount that we write in on the purchase
agreement,

usually in our market I like to put down one percent if
possible. So, on a three hundred-thousand-dollar house, that’s three thousand
dollars.

That being said it doesn’t always have to be one percent,

$1,000 or $1,500 is fine sometimes so that’s okay.

So, the earnest money is delivered when we write up a fully
executed purchase agreement.

We deliver the purchase agreement along with earnest money,
the pre-approval letter and earnest money. Earnest Money is just that it’s a

Good faith statement that says hey, we’re serious about
making an offer on this house.

We’re going to give you this much money, what happens is
that money is held in the trust account for the seller.

So, if the seller is selling with XYZ real estate company
when you give them your three-thousand-dollar check

they will deposit that check into the trust account for XYZ
real estate company and that’s held there in

escrow until closing and then it’s used for your closing
costs.

Your title company will arrange all that and set that all
that up for you.

But that’s it in a real quick nutshell. That’s what earnest
money is. Now

there are two ways that you can get your earnest money back
and they are outlined on your purchase agreement.

Number one is there’s an inspection period at least here in
Minnesota

so, we have an inspection period and there’s a number of
days that’s written in for that inspection period.

Number two is there’s a financing

addendum on the purchase agreement that says for this reason
or this reason you can get your earnest money back now.

That’s a conversation you’re going to want to have with your
Realtor when you talk to them.

So again, just to recap, you’re going to write an
earnest-money check and send it in with your purchase agreement.

That check is going to get cashed and sit in the in the
trust account

for that broker, now in Minnesota we have three days to
deliver the check after we get an accepted purchase agreement.

I like to send it in right away.

So that check will be used at closing to cover your closing
costs and other items

, which you can talk again with your agent about.  Hey also wanted to give you a strategy in a

Seller’s market, when it’s a seller’s market one strategy
that you can do

that’ll make your offer stand above

some other similar offers would be to write a large earnest
money check if you have the money.  Again

that money is not going away off into Lala land.

It’s sitting in an escrow account and it’s going to be used
for your closing.

So, it’s not money that you’re out in a sense.

But if you can write an earnest money check for ten or
fifteen thousand dollars, and there’s similar offers on the table

You’re going to get the home. Hopefully that answers all
your questions. Thanks for hanging out and we will see you next time!

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