Death in the family, illness, loss of a job, or divorce can take a great toll on our daily lives and finances. If tragedy strikes and you are unable to afford your monthly mortgage payments and find yourself falling behind, you may be able to modify your home loan to catch up and avoid foreclosure.
Understanding Earnest Money
You have been searching the market for the perfect home and found one that is for you. If you are serious about the offer, you will give the buyer a deposit of earnest money that they will hold onto until your offer is accepted by the seller. But what exactly is earnest money and how is it used?
Earnest Money Keeps Buyers Dedicated
Simply put, when a buyer puts earnest money on a home, it shows the seller that they are committed to purchasing the home. Otherwise, a buyer could put multiple offers on different homes, which then takes the home off of the market. Earnest money keeps the buyer dedicated to their offer and discourages them from making several offers on other homes to “weigh their options,” which is a huge waste of a seller’s time.
Earnest Money Funds the Home Purchase
Earnest money is held in a joint escrow account or trust by the seller and buyer of a home which goes towards the down payment and closing costs when the home purchase is complete. Earnest money also gives the buyer more time to find financing for the home.
The amount of earnest money a buyer puts on a home varies based on how demanding the housing market is at the time. Typically, buyers can put in a minimum of $500 or 1-2% of how much the home offer. Buyers can work with the seller to determine how much of a deposit you can put down on the home.
Returning Earnest Money
If a buyer decides not to go through with the home purchase after all, they may not get their deposit of earnest money because a lot of time and money was spent on the home by the seller. If you are the seller and you break the real estate contract with the buyer after they’ve given you their deposit of earnest money, you must give the money back.