Video transcript: Earnest money

[lively guitar chords]

On screen:

Understanding Earnest Money

On screen:

James, Real estate attorney

James:

Earnest money deposit is significant. I believe that it's an indicator about the buyer. It tells you something about the buyer. It tells you about their interest in the property, whether they want to put some skin in the game. Earnest money is normally returned at the closing or applied to the purchase price. It's not gonna be a huge amount, we're talking generally I think one percent is reasonable.

On screen:

Mandy and Marie, homebuyers

Mandy:

An earnest money account is an account that we used to let the sellers know that we were serious home buyers. That we wanted this house. So even though it was a pretty low deposit if you ask me.

James:

The earnest money deposit is regarding the contract and the transaction between the buyer and the seller, whereas the down payment is between the buyer and the lender.

Mandy:

The down payment goes more towards your house and you purchasing your house. This wasn't, it was completely different.

James:

The other day I received a call, from a seller, it was about a $300,000 home, and the buyer walked the day before closing, and the earnest money deposit in that case was only $500. Nothing compelled him to stay in the deal, losing $500 is not a big hurt. The earnest money does provide that safety net, if you were, 'cause there's more risk that we're gonna lose some serious money. They are less likely to walk away.