What Is An Earnest Money Deposit?
In the State of California when you’re writing an offer on a home one of the first things you will have to pay is the earnest money deposit .
This article will break down the importance of earnest money and give you tips on how much earnest money you should put down so you will be successful with buying the home of your dreams regardless if it’s in Southern California.
Why Earnest Money Is Important
Earnest money is important because, it shows the seller that you’re a serious buyer, and your offer is being made in good faith.
ows the seller that you’re a serious buyer, and your offer is being made in good faith.
Here in California, the average earnest money deposit that a buyer will put down is about 1% to 3% of a home’s purchase price, and the seller can’t go out and cash that check because, if will be deposited into an escrow account within 72 hours from the executed agreement.
Another reason why earnest money is important is because it sets the seller apart from other sellers who may have made “frivolous offers” on the home without putting down an earnest money deposit.
Understanding Earnest Money
As a home buyer you want to put down between 1% and 3% of a home’s purchase price because, it enables you to begin your new life as a homeowner with some “skin in the game”, and a percentage of the earnest money can be used towards paying your closing costs.
Example: If your total deposit on a home is $20,000, $5,000 will be used for the earnest money, while $15,000 will be used towards paying your closing costs.
Because we are experiencing one of the most competitive Real Estate markets, especially in Southern California, we recommend that sellers should accept no less than 1% to 3% of their home’s purchase price, and sellers should not put down no less than 1% to 3% earnest money on a home, if they really want their offer on a house to stand out from others.
Learn More about Earnest Money
To learn more about earnest money, or to view homes for sale in Southern California, contact Fred Sed Realty today by calling us at (800) 921-9231 or connect with us online.