Laramie, Wyoming Real Estate: What is Earnest Money?

By
Real Estate Agent with CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming

Earnest Money is an advance deposit a buyer submits with their offer to purchase a property.  It says " Pick me! I am earnest, I am acting in good faith to make a legitimate offer on your property."   While 1% of the purchase price is often the suggested amount of earnest money to include with an offer, a buyer can choose to go  higher  or lower depending on a number of things.  Just remember that an offer submitted with a higher amount may be given more consideration than one with a lower amount. 
Dollar sign frog
Owners need earnest money because when they accept an offer, they will be temporarily - hopefully permanently - taking their property off the market.  By agreeing to the terms in a buyer's contract, they are essentially saying "No" to all other real or potential buyers.  They need to know that this risk is worth it, that making their home unavailable to all others will likely result in a positive outcome for them. If the offer is accepted and the deal goes through, then the earnest money is applied towards the agreed upon purchase price at closing.

However, offering earnest money is not without risk.
There are situations that can result in a buyer losing their earnest money deposit.

As such, nearly all written real estate contracts will outline what can be done with earnest money.  These will include provisions that protect the buyer, detailing under which circumstances a contract may be voided and earnest money given back to the buyer.  Contracts will also have provisions that protect the seller and under which circumstances they would be allowed to keep the earnest money.  Generally, "I changed my mind " is not one of the conditions for getting your earnest money back. 


The bottom line is that buying and selling real estate brings with it inherent  financial risks.  An earnest money deposit helps to ensure that both parties, buyers and sellers, are acting in good faith and remain motivated to honor their prospective duties.  After all, real estate is the biggest monetary investment most people make in their lives, so a little assurance - in the form of earnest money - is a small concession if it keeps everyone on the same page and moving forward.

 

*This information is intended only to provide further clarification of real estate issues in Laramie, Wyoming. I am not an attorney.  This article is not endorsed, approved or affiliated with Century 21 Real Estate Center, Inc.  Any consumer with questions about the real estate process should always consult an attorney of their own.

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Rainmaker
183,714
Wanda Thomas
Montana Homestead Brokers, Broker, CRS, GRI, SFR, RN - Billings, MT
Billings Montana Real Estate

thanks for such a good explaination of earnest money.  I know that people have a general understanding of what this entails, but this will help them understand even better.

February 16, 2011 05:21 PM #1
Rainmaker
149,252
Mary M. Kandell
Russell Real Estate Services - Sandusky, OH

Brenda,  I love this explanation of earnest $$.  Such a colorful post too.  I am going to *suggest* it.  If the darn reblog was working, I would love to do that too.

February 16, 2011 05:22 PM #2
Rainmaker
179,653
Brenda Whitman
CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming - Laramie, WY
Associate Broker, Laramie, Wyoming

Hi Wanda and Mary,  Thanks!  It's always hard coming up with the right words, isn't it?  ;-)

February 16, 2011 06:03 PM #3
Rainer
16,028
Johnathan R. Therriault
JTHIS-Professional Home Inspection Team - Blakeslee, PA
Inspecting the Pocono's, one house at a time.

That was the clearest explanation of earnest money I’ve ever heard. I like your little frog creature; he’s a funny little guy…cool colors too.

February 16, 2011 07:03 PM #4
Rainmaker
179,653
Brenda Whitman
CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming - Laramie, WY
Associate Broker, Laramie, Wyoming

Thanks Johnathan!  Clearly, I love the little frogs and hope they help bring the point home. . . ;-)

February 16, 2011 07:16 PM #5
Ambassador
502,344
Pat Haddad
Keller Williams Indianapolis Metro NE - Carmel, IN
Carmel IN Real Estate Expert

Brenda--Excellent explanation.  Hopefully you saved this as a Word doc so you will have it to e-mail out as necessary!  So many people have a completely inaccurate expectation with the earnest money.

February 16, 2011 08:07 PM #6
Rainmaker
179,653
Brenda Whitman
CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming - Laramie, WY
Associate Broker, Laramie, Wyoming

Not yet, but I plan to!  I guess I'll have to make 2 versions - one with a frog and one without for the more serious about life people . . . :-)

February 16, 2011 10:01 PM #7
Rainmaker
894,263
Donna Foerster
Cherry Creek Properties, LLC - Parker, CO
Metro Denver Real Estate Agent

Brenda~ Very well done.  I vote to keep the frog!

May 21, 2012 12:17 PM #8
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Rainmaker
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Brenda Whitman

Associate Broker, Laramie, Wyoming
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