19 Jan What is Earnest Money?

What is Earnest Money?

When a home goes under contract in Texas, buyers will pay something up front called Earnest Money. Think of it like a deposit. It shows the seller the buyer is serious about purchasing the home.  This deposit is applied towards closing costs for the buyer.

There is no set amount that the earnest money should be but here in Texas, it is pretty common to see it at 1% of the sales price.  For instance, if the home is $400,000, the earnest money would be $4000.  Depending on market conditions, and competition for the home, buyers may choose to increase their earnest money in order to make their offer more attractive to a seller.

Is Earnest Money refundable?

The earnest money is refundable IF a buyer backs out during the option period OR if there are any contingencies that the buyer is unable to meet by the dates specified in the contract.  This is why having an agent that understands the contract and keeps up with important dates during the process is crucial.