Earnest Money Q & A

How to handle earnest money when working with buyers and sellers.

Q: Who should hold the earnest money check?

A:  The simple answer:  The Title Company. 

Per Capstone Realty & Associates Policy, we do not hold earnest money. The funds need to be deposited with the title company. If both parties will not agree on the title company the co-brokerage may hold earnest money. 

Q:  How to correctly write the purchase agreement so the title company is holding the earnest money deposit (EMD). 

A:  The answer will vary by the purchase agreement in your regions. Some contracts have a checkbox to select that the title company will hold funds. If that option is not available, you will need to write in a short clause such as:  "Earnest Money Deposit to be held with Title Company." 

Q:  How much earnest money should I have my buyer offer on the purchase agreement? 

A:  Again, this varies by region. Typically, an offer price up to $100K, a $500 Earnest money deposit should suffice. Offers $100K+ typically start at $1000 in earnest funds. Remember, everything is negotiable including the amount of earnest money to be deposited. When in multiple offers, offering a strong EMD may help your buyers offer. Read more about working in multiple offers here. 

Q:  How soon does the earnest money need to be deposited? 

A:  Earnest money deposit requirements are always In accordance with the purchase agreement. Most purchase agreements specify that the earnest money deposit within a certain number of business days. Typically 2-3. Be sure to fully read the purchase agreement so that you are familiar with the terms and conditions of earnest money.