WHAT IS EARNEST MONEY? Some buyers are confussed!

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Real Estate Agent with Parker Properties 0459820

 Animated Money          BLUE Pointing FInger       What IS Earnest Money?

                                                 Some buyers are confused! Aren't they?


How many times have buyers asked, "My earnest money is the down payment, RIGHT?" WRONG!!  

Earnest Money is a good faith deposit but not to be confused with a down payment. When buyers execute a purchase contract, the contract specifies how much money the buyer is initially putting up to secure the contract, to show "good faith", and NOT to be confused with how much money they will be having to come up with as a down payment. Two very different amounts serving TWO very different functions in a transaction.   An earnest money deposit says to the seller:  

YES YES YES"YES, I am seriously (Earnestly) going to go forth with the process of buying your house so much so that I'm willing to put my money where my mouth is." This amount, although not part of the down payment,WILL go toward the amount the buyer will have to come to the closing table with. It WILL be credited to the buyer's closing costs.   DOWN PAYMENT, on the other hand, is at a minimum, set by the lender in order for the buyer to satisfy their credit worthiness. That amount is based on MANY things and is usually set forth at the time the buyer is PRE-Approved for their loan.  

IF you need real estate assistance and you are either moving to North Texas OR you already live in this area and want someone to help you BUY OR SELL......GIVE ME A CALL TODAY! Let's get started.

 Market is MovingThe Market is moving....ARE YOU READY TO MAKE A MOVE??

Kathy Fisher, Realtor
Parker Properties
Wise County & Beyond
940-393-5336
katlyn57@juno.com
www.parkerpropertiestexas.com

Colossians 3:23 - "Whatever you do, work at it with all your heart, as working for the Lord, not for men."

 

 

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Tags:
earnest money
home buying tips
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Rainmaker
279,934
Jack Mossman - The Nines Team in Lodi
The Nines Team at Keller Williams - Lodi, CA
The Nines Team in Lodi

Kathy - We so often just presume that the buyers knows the difference ... thanks for reminding us to make sure they fully understand. 

Sep 20, 2010 02:48 PM #1
Rainer
22,163
Nicole Fleming
FC Tucker Emge - Henderson, KY

That question comes up alot.  Or, even more, "Do I have to put earnest money down?"  I hate that question even more.

Sep 20, 2010 02:52 PM #2
Rainmaker
56,844
Kathy Fisher
Parker Properties - Decatur, TX
Realtor Wise County Texas

Jack - You are so right. SO MANY times, we as Professionals just take it for granted that the process of buying/selling a property is common knowledge. If that were the case, WHAT would the consumers need us for???

Nicole - I do hear that later question many times as well. Again, most buyers, especially the younger buyer, just doesn't know the process, or the steps. But, as a Realtor, I feel this is part of my job/service to them......EDUCATE.

Sep 20, 2010 03:19 PM #3
Rainmaker
350,778
Brian Rugg
Rugg Realty LLC Sun City Texas 512-966-3200 - Georgetown, TX
Sun City TX Real Estate - Georgetown, TX Real Est

Hello Kathy:

 

I wish you had underlined the fact that the earnest money doesn't disappear and is credited to the buyer in someway at closing. This is where I find most of the confusion. Good post.

Sep 20, 2010 03:27 PM #4
Rainer
143,852
Victor Zuniga
Berkshire Hathaway Home Services California Properties - San Diego, CA

This is very true and especially with the vast amount of first time home buyers we saw in recent months. Good job Kathy!

Sep 20, 2010 03:51 PM #5
Rainmaker
56,844
Kathy Fisher
Parker Properties - Decatur, TX
Realtor Wise County Texas

GREAT SUGGESTION! I will go right back and edit that phrase!

Thanks so much Victor!

Thanks to all of you! Glad to know its not just ME that gets these questions!

Happy SELL'ng out there to all

Sep 20, 2010 05:54 PM #6
Rainmaker
825,887
Nicholas Goglucci
South Florida Real Estate & Development, Inc. - Pompano Beach, FL
The Listing Whisperer

Kathy - Wonderful post - I always require the buyers put up a substantial earnest money 0r good faith deposit - especially in this market - 

Sep 20, 2010 10:42 PM #7
Rainmaker
825,887
Nicholas Goglucci
South Florida Real Estate & Development, Inc. - Pompano Beach, FL
The Listing Whisperer

I suggested this be a featured post - hopefully the ones who make the decisions do the right thing here!

Sep 20, 2010 10:44 PM #8
Rainmaker
640,298
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Kathy, You wrote an informative post about something we can take for granted but it is often confusing to our clients.  I have also suggested for a feature.

Sep 20, 2010 11:30 PM #9
Rainmaker
563,876
Mike Saunders
Lanier Partners - Athens, GA

Kathy - excellent explanation for the first time buyer, and reminder for the repeat buyer, as well as the agent.

Sep 21, 2010 07:39 AM #10
Rainer
292,771
Melissa Anderson
Amcap Mortgage, Ltd. - San Antonio, TX

Kathy- Clearly your post speaks to your experience in the matter.  I think it is sad when buyers have no idea what the earnest money was for or where it goes after they write the check.

I often have buyers ask me (the lender) what happens to their earnest money deposit.

Good post.

Sep 21, 2010 05:35 PM #11
Rainmaker
56,844
Kathy Fisher
Parker Properties - Decatur, TX
Realtor Wise County Texas

SORRY ALL for not responding before now. I've been out away from the computer all day.  

NICK - dear friend, that is SO SWEET OF YOU! This would be a first if it did get featured and I would be truly honored for you suggesting it!  

Marchel & Mike - thanks for stopping by and leaving your very encouraging words. I just thought maybe I was the only one getting this type questions from buyers recently.  

Melissa - your comments just confirm the importance of "schooling" the 1st time buyers that come our way. It is just NOT common knowledge of what the process is or what the steps are.  

Again, THANKS all for stopping by!

Sep 21, 2010 11:42 PM #12
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Rainmaker
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Kathy Fisher

Realtor Wise County Texas
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