Earnest money is essentially a deposit in a real estate transaction. Like any purchase that you want to be “held” before you pay for it in full, the earnest money “holds” the property while financing, inspections and other details are worked out. Without earnest money, you as a buyer could make and then cancel numerous offers on different properties without any recourse for the sellers. The earnest money lets the seller of a property know you are serious about pursuing the home they have for sale.
How Much Earnest Money Is Required?
A typical earnest money amount for a resale transaction in Boise and the surrounding areas is anywhere from $500 to $1,000. The purchase price of the home as well as other factors can lead to a buyer offering more earnest money, but varying widely from the above amounts are not the norm for this area.
If you are looking to build a new home, the average amount required is around 10% of the purchase price. Of course, this amount can vary depending on the circumstances of the transaction.
Where Does My Earnest Money Go During the Transaction?
The earnest money is typically held in the buyer’s agent’s trust account until closing. A seller might also request that the money be deposited with the title company.
Will I Get My Earnest Money Back?
If the deal falls through because of financing or items found through a home inspection, you will typically receive your earnest money back. The return of your money is dependent upon how the contract was initially written, so it is important to make sure you agent has appropriately covered the earnest money return in the contract.
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