What Is Earnest Money Deposit?

Dated: July 19 2021

Views: 95

Earnest money deposit is literally just a show of faith. When you go to the closing table, it becomes part of your cash to close equation, which includes other line items like your down payment, your closing costs, and your prepaid items. It’s not a bribe or an extra fee to convince a seller to sell to you. It will simply be applied in full as a credit in your closing documents, reducing the amount of money you need to bring with you on the big day.

Here’s the one kicker. If you were to decide to back out of the contract with no real cause, the seller may be entitled to some or all of that earnest money. However, plenty of situations exist where you may not be able to close, but your earnest money will be refunded, such as:

  • An unacceptable home inspection.

This all has to be stipulated in your contract; there are no givens in a real estate transaction, but there are things that are pretty standard. Having an unacceptable home inspection, if the seller is not willing to make reasonable repairs, can be a cause for terminating the contract and getting your earnest money back.

  • Your financing falls through.

Again, you’ll need a financing clause or addendum to ensure you’re covered in this event, but because financing is so important to real estate transactions in general, they are pretty standard. If your financing falls through due to no fault of your own (you’ve been laid off, your bank closes, a co-borrower dies), you should generally be able to reclaim your earnest money. The specifics will be in your real estate sales contract, so pay close attention.

  • The seller can’t close.

There are a few rare situations where a seller can’t close the transaction. These are incredibly uncommon, but they do happen once in a while. For example, you might find out that the seller only believed they were the owners of the home. This can occur when a parent dies without a will, forcing the property into probate court even when it’s clear an only child will be the sole heir. And in the case that the seller can close, but chooses not to for whatever reason, you would also get your money back.

Blog author image

Kenneth Manesse

Helping you experience something new in Las Vegas that's guaranteed. Real Estate with less stress!....

Latest Blog Posts

Monthly Housing Market Report Nov. 2021

Realtor.com®’s November housing data release reveals that the number of homes for sale continues to be limiting both buyers and sellers.This past month, the rate of decline in inventory

Read More

Top 2 Home Office Trends To Watch

The home office is one of the most coveted spaces in a home. Find out what styles are trending for this room or how to create one when square footage is tight. With the housing market exploding,

Read More

Will Las Vegas Red-Hot Housing Market Cool in 2022?

Will Las Vegas red-hot housing market cool in the coming year? Probably not, according to National Association of Realtors Chief Economist Lawrence Yun. Yun shared four reasons why he thinks

Read More

2 Projects to Help Resale Value in Las Vegas (video)

Home buyers will likely wonder about the age and upkeep of certain big-ticket features in a home like the roof and HVAC system in Las Vegas. But they will also likely be interested in just how move

Read More