I recently has a Metro Detroit first time home buyer ask “What is earnest money?” Earnest money is basically good faith money. When you write a purchase agreement on a home in Northville Michigan the seller will want you to put a deposit down on the house. Usually they want about 1% of the sales price. So what earnest money is a deposit on the house when you write a purchase agreement.
So if the Northville home is $200,000 the earnest money most likely would be $2000. If you just decided to back out of the house deal you could lose your earnest money. Earnest money keeps the buyer honest and doesn’t let them just walk away with out losing something. That is why seller’s like a sizeable earnest money deposit.
The only two ways to get out of a purchase contract and get your earnest money back is by way of the “inspection contingency” and the “mortgage contingency” in a purchase contract. I will talk more about those later in a different blog. If you are able to back out of the contract both the buyer and seller have to sign a mutual release. Both parties have to sign to release the money otherwise it would have to go to arbitration or to court.
Your earnest money is used as a “deduction” when it comes to the closing table. So if you bought a $200,000 Northville home and needed a $10,0000 down payment. The $2000 earnest money would be become part of the $10,000 down payment. So then you would only need $8,000. That $2000 is on the HUD settlement statement and is applied to your closing costs or to your down payment.
So I hope that explains “what is earnest money”. If you have questions about buying a Northville home or any Novi real estate feel free to email me at firstname.lastname@example.org. I have helped hundreds of people buy their first home. So it doesn’t matter whether you are buying a Livonia condo, a Lakefront home for sale in Oakland County MI, or any piece of Metro Detroit real estate. I help people buy and sell homes in all five counties
- Oakland County
- Wayne County
- Livingston County
- Washtenaw County
- Macomb County
Call me on my cell at (248) 310-6239 to get started today.
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