What Is Earnest Money Deposit?

Dated: July 19 2021

Views: 87

Earnest money deposit is literally just a show of faith. When you go to the closing table, it becomes part of your cash to close equation, which includes other line items like your down payment, your closing costs, and your prepaid items. It’s not a bribe or an extra fee to convince a seller to sell to you. It will simply be applied in full as a credit in your closing documents, reducing the amount of money you need to bring with you on the big day.

Here’s the one kicker. If you were to decide to back out of the contract with no real cause, the seller may be entitled to some or all of that earnest money. However, plenty of situations exist where you may not be able to close, but your earnest money will be refunded, such as:

  • An unacceptable home inspection.

This all has to be stipulated in your contract; there are no givens in a real estate transaction, but there are things that are pretty standard. Having an unacceptable home inspection, if the seller is not willing to make reasonable repairs, can be a cause for terminating the contract and getting your earnest money back.

  • Your financing falls through.

Again, you’ll need a financing clause or addendum to ensure you’re covered in this event, but because financing is so important to real estate transactions in general, they are pretty standard. If your financing falls through due to no fault of your own (you’ve been laid off, your bank closes, a co-borrower dies), you should generally be able to reclaim your earnest money. The specifics will be in your real estate sales contract, so pay close attention.

  • The seller can’t close.

There are a few rare situations where a seller can’t close the transaction. These are incredibly uncommon, but they do happen once in a while. For example, you might find out that the seller only believed they were the owners of the home. This can occur when a parent dies without a will, forcing the property into probate court even when it’s clear an only child will be the sole heir. And in the case that the seller can close, but chooses not to for whatever reason, you would also get your money back.

Blog author image

Kenneth Manesse

Helping you experience something new in Las Vegas that's guaranteed. Real Estate with less stress!....

Latest Blog Posts

Big Bathroom Impacts from Small Changes

Nobody likes a small bathroom. Unfortunately, a lot of houses have them. If you live in a home with a bathroom that makes you feel a bit claustrophobic, you might think that there isn’t much

Read More

Home Prices Up 15% Across the Nation.

Housing demand is easing while supply is slightly improving, narrowing the demandsupply gap. Preliminary data from (National Association of REALTORS - see complete details here) shows that

Read More

Final Walk-through - What Buyers Should Look For in Las Vegas.

Buyers often don’t realize that the final walk-through before closing is a vitally important part of the homebuying process. They should be reminded that this final walk-through can determine

Read More

Give your homes curb appeal a significant boost.

You might think that it takes a lot of work and money to update the curb appeal of your home, but that doesn’t have to be the case. It’s possible to significantly increase the curb

Read More