Answers to the most Frequently Asked
of real estate professionals!
What Is Earnest Money?
Certain misunderstandings exist regarding the
purpose and proper handling of an earnest money deposit given by the buyer
in a real estate transaction. In fact, disputes over forfeiture of a
deposit are quite common. So, to avoid problems in a future real estate
purchase, let's look at the role that the deposit plays in buying real
DEFINITION: The earnest money deposit is a sum of money paid by the
buyer at the time of submitting an offer to purchase real estate.
PURPOSE: The purpose of the deposit is to show "good faith" by the
buyer that he or she intends to follow through with the terms of the sales
agreement. If the buyer does not live up to the agreement, the deposit
shall be forfeited to the seller as payment for any damages suffered by
the seller as a result of the sale not being completed as planned.
AMOUNT: The amount of the deposit varies in different areas
depending upon local custom or the specific needs of a particular
transaction. The size of the deposit will have an effect on the
desirability of the offer. Many buyers have won properties away from
competing offers only because they gave a larger deposit than others being
considered by the seller. If you really want a piece of property, make
your deposit large enough to help your offer win acceptance.
ADVICE: Always buy through a Realtor so you may have the assistance
of a professional when making an offer on your next home.
Valentine Hansen ● REMAX
Properties ● Pavilion In The Park
8201 Cantrell, Suite 225 ● Little Rock, AR 72227
Office: (501) 224-4111 ● Direct: (501) 960-4667 ● Toll Free 800-399-2704