Importance Of Your deposit
It does not matter if you are a first time or a fifth time home buyer; you will likely secure your purchase offer and legitimize your purchase contract with a deposit known as earnest money deposit (EMD).
Earnest Money Deposit: Money deposited by a buyer to confirm intent to purchase and to ensure buyer best efforts to complete the sale as defined by the contract.
When you make an offer to buy residential real estate, you pay a sum acceptable to the seller by way of earnest money. The amount varies based on geography, home price, local regulation, and the state of the market at the time of negotiations.
In a real estate market with limited inventory, typically be referred to as a “seller’s market,” your earnest money – or lack thereof – can make or break your deal for several reasons.
First, it shows the seller you are legitimate in your desire to purchase their property. Earnest money, since it is non-refundable in the case of breach of contract (failure to close), shows an intention of closing the sale. To execute the contract, it indicates a level of confidence to the seller that you are ready, willing, and qualified to make things happen. If you fail to meet your obligations as defined in the purchase contract you can, and sometimes will, forfeit your earnest money deposit.
An earnest money deposit (EMD) should be held by a third-party escrow company according to the terms of the executed purchase contract. The fiduciary responsibility of the agent accepting the earnest money is to deposit the money in the right place.