Earnest money is money you put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price. However, the amount can vary depending on local customs and conditions. It’s a good idea to talk to an experienced real estate agent to get an idea of what conditions might apply. For instance, a competitive market could result in you needing to put down more money in order for the seller to take you seriously.
If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the seller rejects your offer, your earnest money is returned to you. If you back out of the deal, you may forfeit the entire amount, so make sure you’re seriously committed to the deal before putting down your hard-earned cash.
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