What is Earnest Money When Buying a House

What is Earnest Money When Buying a House? Cumming GA Realtors – Thompson Realty Atlanta will explain the process of Earnest Money and how it pertains to you buying your dream home.

What is Earnest Money When Buying a House
Rick Thompson:
What is earnest money? How much does it cost? And who holds it? In this video, we’re going to talk about all that and more.

Hey, everybody. Welcome back to my channel. My name is Rick Thompson. I’m a realtor with Keller Williams Realty Atlanta Partners, and my team is Thompson Realty Atlanta. On this channel, we talk about everything real estate. So whether you’re thinking about buying, selling, you need staging tips, or if you just want to know cool places to live in Georgia, this is the channel for you. If you haven’t already, go ahead and hit that subscribe button, and hit that bell so you see the latest videos that we post.

So what is earnest money? Earnest money is a good faith deposit. So let’s say you’re buying a home for $300,000 here in the Cumming, Georgia area. You’re going to put up your good faith deposit so that the seller will take their home off the market and go forward with selling you the home. Now, this is money that is refundable to you if you cancel during your due diligence period. Due diligence is a period where you get to get your home inspection done, test the drive. If you want to drive from that house to work that morning and clock it, and see if it’s too far from work or not, this would be the time to do that.

There’s just so many things that go into a due diligence period that we talk over, and over, and over. But this is really when you would get the home inspected, and you can inspect the home as much as you want. That’s your right as the buyer, and you want to do this during this period. If you find something that doesn’t sit well with you, or if you don’t really want to proceed forward, or something’s extremely concerning, this would be the time where you can cancel and get your earnest money back.

Now, let’s talk about how much earnest money should typically be. Okay. Rule of thumb here in the state of Georgia is typically about 1% of the purchase price. However, and my clients can attest this, I’ve gotten earnest money as low as $500 on a $300,000 purchase. So it really depends on the realtor’s ability to negotiate, and the rule of thumb is, if you don’t ask, you won’t get, so be sure to get with your realtor on that, about the earnest money amount.

So don’t get discouraged if you don’t have that 1% saved up, but get with your realtor and ask that question, how much do I need for earnest money in my area? Typically, rule of thumb here is 1% in Georgia. However, I’ve seen it much, much less. I’ve seen it as low as $500 and I’ve seen it as high as $50,000. So it kind of depends on your purchase price.

Okay, let’s talk about who holds the earnest money. So when you have determined how much earnest money you’re putting down, kind of need to deal with, and that’s who’s going to hold the earnest money. So typically, and there’s rules for this, but most attorneys will hold earnest money and most brokerages will hold earnest money up to a certain amount.

So here in my office, for example, Keller Williams Realty Atlanta Partners, if you’re buying a home and you’re using myself as a realtor, we’re going to negotiate that Keller Williams Realty Atlanta Partners is going to hold that earnest money, because it’s just a lot smoother when it comes to turning it in, we can get it deposited really quickly, and honestly, your realtor can keep an eye on that. So that’s what we do for our clients.

The threshold for our broker holding earnest money is $5,000. So anything above $5,000, we typically either have our clients write a check to the attorney, or we have them wire it to the attorney and it’s held by the attorney. Be sure that your realtor knows what they’re doing, because there are special forms that go with an attorney holding earnest money, and a lot of realtors miss it and mess it up for their clients. I’ve seen a few people lose their earnest money over it. So be sure that your realtor is always up-to-date on the latest GAR contracts or whatever contracts that your, wherever you’re buying, whatever state that may be, make sure your realtor is up-to-date on those contracts.

So that’s it, guys. Real short and sweet video here on what is earnest money, who holds it, and how much does it cost? I hope you found this video helpful. If you haven’t already, go ahead and hit that subscribe button, and hit that notification bell. That way, you see our videos the moment they come out. Be sure to subscribe because, hey, we talk about everything real estate, and real estate’s important.
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