If you’re planning to buy a home in South Jersey, you’ll need to pay something called the earnest money deposit. If you’ve never bought a home before, you may not be familiar with the term “earnest money” or what purpose it serves.
In this post, our team at Your Home Sold Guaranteed Realty - Nancy Kowalik Group will discuss what earnest money is, when you’ll need to pay it, and how much you can expect to pay.
- The earnest money deposit is a sum of money you’ll usually pay right after a seller accepts your offer on their home and before signing an official purchase agreement.
- Typically the earnest money is one to three percent of the home’s listing price. In South Jersey, a standard earnest money deposit would be between $2,000 to $5,000 for a $300,000 house.
- The exact policies around earnest money and under what conditions it can be refunded will depend on the purchase agreement contract. Real estate laws also vary from state to state.
What Does Earnest Money Mean?
The earnest money deposit is a sum of money you’ll usually pay right after a seller accepts your offer on their home and before signing an official purchase agreement. It shows the seller you have serious intentions and are committed to purchasing their home. It also helps them decide to stop considering new offers and focus on yours.
You can also submit the earnest money deposit along with your initial offer if you really want to persuade the seller to take your offer.
Typically the earnest money is one to three percent of the home’s listing price. In South Jersey, a standard earnest money deposit would be between $2,000 to $5,000 for a $300,000 house.
The money isn’t actually held by the seller directly– it’s held in escrow by a third party, usually by a title company or real estate brokerage.
Is the Earnest Money Deposit Refundable?
If the sale goes through successfully, the earnest money deposit becomes part of your down payment at closing. If there is no purchase agreement, the company will typically return it to you, minus a small cancellation fee.
If a purchase agreement is signed and you back out of it for no valid reason, the seller can technically keep the earnest money as compensation for taking their home off the market.
You can also lose your earnest money deposit for defaulting on any of the terms of the purchase agreement. This could include situations like:
- Failing to secure financing before the end of a mortgage contingency period (if you don’t have pre-approval beforehand).
- Not meeting agreed-upon time frames for inspections or appraisal.
- Trying to renegotiate the price for no justifiable cause.
- Not showing up to closing.
There are other situations where you can usually retrieve your earnest money deposit. For example, ending the contract for a legitimate reason such as the home failing to appraise for the same amount as the asking price or serious repairs found during the home inspection that were unreported by the seller.
In addition, in a scenario where the seller accepts another offer before the inspection contingency period ends, your earnest money would also be returned.
The exact policies around an earnest money deposit and under what conditions it can be refunded will depend on the purchase agreement contract. Real estate laws also vary from state to state. This is why it’s crucial to work with an experienced South Jersey real estate agent. Your realtor will ensure you fully understand the rules regarding earnest money deposits in your area.
Buy a Home in South Jersey Today with Nancy Kowalik
While putting down earnest money can feel nerve-wracking, you can take comfort in knowing it’s a process that protects both you and the seller equally. With a reputable agent guiding you, earnest money doesn’t have to be complicated.
At Your Home Sold Guaranteed Realty - Nancy Kowalik Group, Nancy Kowalik and our team have years of experience working with home buyers and handling earnest money deposits. We’re rated as the best realtor in South Jersey for a reason. Our clients love working with us to buy a home because of our commitment to high-quality customer service, attention to detail, and unique buyer guarantees, like our Buy it Back Guarantee.