What is an Earnest Money Deposit:
Many home buyers are a bit unsure of what an Earnest money deposit is. The buyer makes this deposit to tell the seller that you are a committed and serious buyer. In today’s fast paced market, the larger the deposit the more serious the seller may take your offer.
Things to know:
- The average earnest money deposit usually equals 1-3% of the purchase price of the home.
2. This money is not paid to anyone until you have an offer that has been accepted by both buyer and seller. Upon reaching an agreement, you will have 3 days to deposit these funds.
3. In Oregon the money is paid to the title & escrow company which will be the neutral third party in the real estate transaction. These monies are not paid to the seller or real estate agent.
4. This money will ultimately be used towards your down payment funds or closing costs needed at the time of closing the transaction
5. This money can be refunded for specific reasons if you exit the real estate contract. For example, you have a home inspection and you find something that is alarming and you choose not to proceed with the transaction. Your earnest money deposit would be refunded to you.
There are so many terms that are used during a real estate transaction that the first time home buyer many not know. That is certainly a reason to have a real estate professional by your side, to help you understand and navigate all those aspects of the transaction that you may not be familiar with. Don’t be afraid to ask questions even before you start actively looking for a home.