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What is earnest money? Earnest money is your good faith deposit that you will honor and
fulfill the terms of the contract. You deposit money into a trust account that's held by
the broker, and as long as you follow the terms of the contract you get your money back
when the property closes.
The next questions is how much and when? Generally earnest deposits in our Columbus market are
smaller deposits, usually a couple thousand dollars or less. The money, again, goes into
the trust account and as long as ou follow the terms of the contract you don't forfeit
the deposit. If you're a buyer, the smaller the deposit the better for you. If you're
a seller, if you want a larger deposit from a buyer. It generally sales that you have
a stronger buyer that's more likely to close.
The question becomes, how is the deposit handled when you don't close or when someone doesn't
buy the house. If you're a buyer, you need to keep in mind that a seller can tie up your
deposit. In other words, if the inspection goes bad or the house doesn't appraise, even
if that's a contingency in the contract, if the seller wants to hold you hostage and extort
money the broker cannot release your deposit. It sits in the trust account until you go
to court or if some kind of remedy is agreed upon.
If your a buyer in terms of that deposit it becomes important at that point because your
money is tied up. You're making an offer one a property in a competitive situation, if
there's a multiple offer situation, sometimes offering a larger deposit of 10-20 thousand
dollars, I've had that work out where we ended up getting a house because of that. Even when
our offer was for less money than the other because the seller thought we were more likely
to close on the property.
So again, just keep in mind, earnest money isn't always so easy to be released. It requires
both parties to agree upon it and without a mutual release or a signature from both
sides, the deposit stays in the trust account. And that's important to keep in mind when
buying or selling.