Earnest Money Deposit

Earnest Money Deposit 8th & Home

Just what IS Earnest Money Deposit?

There are many terms and acronyms that one will hear during a real estate transaction and "EMD" or Earnest Money Deposit is one of them!

Broken down quite simply, the Earnest Money Deposit is a good faith deposit that is given by the purchaser or a property to the seller. You will make your deposit at the same time you present your offer to the seller. As each state is different, it is very important that you speak with your Realtor© about the ins and outs of this process. Most typically, the funds (usually deposited with your real estate agent's broker or the title company) are deposited into an escrow account.

An escrow account is a bank account that exists for the purpose of holding funds until they are needed, most often at the time of settlement. Once settlement occurs, the deposit is applied to either closing costs, your down payment or returned to you at closing.


Why is Earnest Money Deposit necessary?

When you write an offer to the seller of the home you are interested in purchasing, providing an Earnest Money Deposit shows the seller that you mean business, that you are willing to "put your money where your mouth is" and also allows your offer to stand out above the others, should there be multiple offers received.

If your situation is one of multiple offers, you may want to consider upping the ante a bit and offering a larger EMD. As you begin a relationship with the seller of the property you are interested in, it is important to start off on the right foot.

Contingencies and the Return of the Earnest Money Deposit.

Contingencies protect the buyer through the home buying process. If there are issues with the home inspection, or financing becomes unattainable, etc, contingencies are what exist to allow the buyer to walk away from the contract.  In these cases, the Earnest Money Deposit is typically returned to the buyer. However, if the buyer cancels the contract for a reason not covered by a contingency, the deposit is generally forfeited to the seller.

How Much Will My Earnest Money Deposit Total?

Depending on the area you are purchasing in, the price of your home, and the specifics to your transaction, the Earnest Money Deposit total will vary.  Typically the Earnest Money Deposit is between 1-2% of your sales price. As discussed previously, if you are competing against other offers, you may want to consider a higher EMD.

What are Contract Contingencies?

We cannot stress enough how important it is that you have a trusted and experienced Realtor© when buying a home. Your agent will help you understand all applicable dates for each contingency, as each one can impact the potential return of your deposit. Contingencies are written and utilized to protect both parties, but most specifically, the buyer. Below are some of the typical contingencies written into an offer to purchase a home:

  • Contingent on selling your current home
  • Contingent on a home inspection
  • Contingent on appraisal
  • Contingent on obtaining financing

If you have more questions about the Earnest Money Deposit process, or the steps to purchasing a home, feel free to email us or call for more information!



Home Inspections 101

Home Inspections 101 Once the contract has been fully signed by both the buyer and seller, the buyer's agent will arrange to schedule a home inspection! The inspectors have access via lock box and/or the buyers' agent will be present. This is an exciting time for the buyer and they will likely attend the inspections as well, however, the seller is not present in the home. This allows the buyer a chance to see the home again and review the findings with the inspector.

Depending on the size of the home, a home inspection typically takes one hour per every 1,000 square feet in the property. The seller should make sure all doors (attic and crawl space) are unlocked and all equipment is accessible. Seller will also need to ensure the power, gas and water is on before and during the inspection, as well as any pilot lights lit.

Once the buyer receives the full inspection report (some inspectors provide it on the spot, others usually send within 24-48 hours), they will review it with their agent and decide if they want further inspections or ask for any repairs. The buyers will make an official request for repairs as an addendum to the original contract. Once the seller's agent receives the addendum, along with the inspection report, the seller will be made privy to the findings.

Major points of concern may include moisture or water issues. Structural issues will be found during this inspection process, as well as any electrical, plumbing, heating or air conditioning concerns.  Minor concerns may be cosmetic in nature, siding or trim damage, leaking fixtures or dirty filter issues.

It is the duty of the buyer to review the inspection report with their agent to determine what, if any, concerns they wish for seller to remedy. The addendum will note those concerns and requests for repair. Seller has the option to accept the request in full, negotiate which items they will remedy or refuse to undertake the repairs.

Because the home inspection takes place during the Due Diligence period, the contract may be cancelled if buyer discovers concerns that are notremedied to their liking.


Home inspection and repair addendums are not an opportunity for the seller to return the home to like-new condition. This is an opportunity for buyer to be aware of any major issues and concerns going into the final stages of the contract before the settlement, and to allow the seller to have a chance to remedy, should the agreement be reached.

Cosmetic items are typically not included in the repair addendum as those were visible during the initial viewing of the home, and prior to the offer to purchase being made. Things like carpet stains, markings on the wall, loose or ill-fitting fixtures or wall plates would likely not be included in a repair addendum.

Structural or environmental issues are morelikely to be addressed in the repair addendum and should be dealt with by hiring licensed professionals for any repairs.

Once any requested repairs have been agreed to, the contingency for said repairs is removed and the contract moves out of the Due Diligence phase. Receipts will be requested prior to settlement and a preliminary walk through will be held a couple of days before settlement is planned for buyer and/or the buyer's agent to review all repairs.