You've found the perfect Lake Havasu home. You want to make an offer. When you do, you may have to include an earnest money deposit. But, what is an earnest money deposit and where does it go?
What is an Earnest Money Deposit?
Sometimes referred to as "good faith money", an earnest money deposit is a sum of money you, the buyer, offers up front. It shows the seller that you're serious about buying their Lake Havasu home. In turn, the seller agrees to take it off the market while the home buying process takes place.
How Much Money is Involved in an Earnest Money Deposit?
This amount varies. Some sellers accept as little as $500 to $1000. Others want 1-2% of the sale price. There's a delicate balance between too much and too little. You don't want to give more than necessary up front. However, too low of an amount can jeopardize your chances of having your offer accepted. Talk to your Lake Havasu REALTOR@ to find out what an appropriate amount might be for your circumstances.They can negotiate this amount with the seller's agent on your behalf.
What Happens to the Earnest Money Deposit?
Typically after the offer is accepted, the check gets cashed right away. Next, that money goes into an escrow account. Then, the money sits in the account until completion or cancellation of the sale. If the process ends with a sale, the earnest money deposit will be applied to your down payment or closing costs.
Unfortunately, sometimes sales fall through. This happens for a variety of reasons. You might not get approved for your home loan. Or, the home inspection reveals major problems. The reasons for a cancellation vary from transaction to transaction. As long as you adhere to the stipulations drawn up in the sales contract/purchase agreement, the money will be refunded to you. But, if you walk away for any reason other than those laid out in your contract, the earnest money stays with the seller.
If you have any questions about an earnest money deposit, please contact me. I'll be happy to help you find your next Lake Havasu home. I'm ready and waiting to hear from you.