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Earnest Money |
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When buying a home, is earnest money mandatory? Is it a must that I give my realtor $500 as "good deed money", or earnest money? |
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An earnest money deposit is not a legal requirement for a sales contract. Your promise to buy is considered enough "consideration" to make the document binding. But there's a practical side to the matter -- without a deposit, you might have a hard time getting any offer accepted.
A seller would be nervous about signing a contract when you hadn't put any of your own money up as a token of good faith. With none of your money at risk, you might feel free to back out later. Meanwhile the seller would have taken the house off the market, lost valuable marketing time, spent money making plans to move etc. The earnest money serves to reassure the seller that you really mean it, that you're committed to going through with the purchase.
You don't exactly give the money to the agent, by the way. It must be held in a special "escrow" or "trust" account, ready to be credited toward your purchase price when everything is set for the actual sale. |
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Edith
Originally published on April 21, 2008 |
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