11/29/2023
Lets’ talk Real Estate: Quiz
What’s earnest money?
A. Funds meant for a serious purchase
B. Reference from the film Ernest Goes to Camp
C. Another term for down payment
D. Funds provided at escrow commencement to signify a serious offer
Answer: The answer is D. Also termed good-faith deposit, an earnest money deposit (EMD) of 1 to 3 percent of the sales price is wired to escrow within days of an accepted offer. It demonstrates buyer commitment by putting “skin in the game.” Escrow retains the funds in a non-interest-bearing account. At close of escrow, the funds are then applied to either the down payment or closing costs.
The EMD is typically refunded if the buyer backs out of the sale for legitimate reasons (e.g., the house doesn’t appraise for the agreed-upon price or major defects are found during the inspection, or the buyer dies the day before it’s finalized!)
