Another term for earnest money is deposit. Earnest money is the amount of money given by the buyer to the seller with an offer to purchase a home. The purpose of the deposit is to show good faith that you are serious about purchasing the home.
How do you know how much money to give as a deposit? The amount of money varies with each purchase agreement. Generally it depends on the value of the home. It should be an amount that is sufficient enough to indicate to the seller that the buyer will not walk away from the deal without good reason. In Southwest Florida, the traditional amount of a deposit is $500 to $1,000. It can be anywhere from 1 percent to 5 percent of the purchase price. You don’t want to make too large of a deposit; that is what the down payment is for. Do not confuse the two.
Earnest money is usually in the form of a check which can be a personal check, cashier’s check, or money order. It is given with the offer to purchase and it deposited in a broker’s trust fund or escrow account with a law office or title company. If the offer is accepted, the money will be applied to the down payment or other costs when the closing takes place. If your purchase offer is not accepted, the check will be returned to you.
Florida has very strict rules for handling escrow deposits. If the deposit amount is written on the contract, then the check must be submitted with the offer to the seller. Another way is to write on the contract that the deposit would be collected at acceptance.
Once the deposit is received, the real estate agent must deposit the check into an escrow account no later than the end of the 3rd business day following receipt of the check.
Tammy Hayes, Realtor, Sandals Realty, Punta Gorda, FL email@example.com