What is Earnest $$$ and why you SHOULD do this!
Earnest Money and Contracts
BREAKING DOWN ‘Earnest Money’
When a buyer decides to purchase a home from a seller, both parties enter into a contract stipulating the final sale price of the house and the down payment. The contract does not obligate the buyer to purchase the home, because reports from the home appraisal and inspection may later reveal problems with the house. The contract does, however, ensure that the seller takes the house off the market while the house is inspected and appraised. To prove to the seller that the buyer’s offer to purchase a property is earnest or in good faith, the buyer will be required to make an earnest payment as a deposit.
The earnest money paid is put toward the buyer’s down payment when the transaction is finalized. The transaction is usually finalized after inspections are done and the buyer secures a mortgage with the lender. If the deal falls through, the buyer may or may not be able to reclaim his or her earnest money, depending on how the contract is phrased. If the contract stipulates that the buyer must have appraised the home by a certain deadline, and this does not happen within the specified time frame, the buyer will probably not be refunded his earnest money. If the buyer decides not to go through with the house purchase for contingencies not listed in the contract agreement, he is most likely to lose the earnest money deposited. The earnest money is retained by the seller to protect the seller from any monetary damages incurred from the broken contract and to keep the resolution of damages out of court. The buyer is likely to get his full earnest deposit back if a failed contingency, such as poor results from an inspection, ensues. Also, if the seller terminates the deal, the earnest money will be returned to the buyer. In the Fort Leonard Wood Real Estate Market the typical earnest amount ranges from $250- $2,000, of course, the higher the earnest money, the more serious the seller is likely to consider the buyer. Therefore, a buyer should offer a high enough earnest deposit to be accepted, but not so high as to put extra money at risk since there is still a chance that the deal might not go through and the deposit not refunded.
Earnest money is usually paid by certified check, personal check or a wire transfer into a trust or escrow account that is held by a real estate brokerage, legal firm or title company. The funds will be held in the account until the sale of the home has been finalized. At this point, the earnest funds are applied toward the buyer’s down payment. It is important to note that escrow accounts, like any other bank account, can earn interest.
So the answer to your question is YES!!!