Earnest money is a payment you put down to show you are serious about purchasing a home. It essentially acts as a deposit on the home and is given to the seller when signing the sales contract or purchase agreement. If you're buying a house for the first time, earnest money may be a new concept; here is what you need to know about these types of deposits.

How It Works

Most earnest money deposits are around one to three percent of the sale price, though the amount can be as high as 10 percent in a particularly competitive market. Your real estate agent can help you determine the most appropriate amount. They will evaluate the property and the climate of the market to arrive at an appropriate sum.

The money is held in an escrow account until the transaction is finalized, then delivered to the seller via personal check, cashier's check, or wire transfer. The money is applied to your down payment or closing costs.

Benefits for the Buyer

Putting down earnest money demonstrates to the seller your commitment to buying a house. In a competitive housing market like the current one, this can help you stand out as a prepared and serious buyer and make your offer more appealing to the seller. It is a relatively easy way to bring you that much closer to your goal of homeownership.

Benefits for the Seller

When a seller and buyer enter into a purchase agreement, the seller takes the home off the market. But if the deal falls through, the seller will have to relist the home and restart the process, which can be costly. An earnest money deposit protects the seller against financial loss in this situation. It also minimizes the risk of the buyer placing offers on other homes and then abandoning the sale if another offer is accepted.

If you want to buy a house in the Atlanta, GA, area, consult with 20 West Realty. They offer a comprehensive selection of residential and commercial real estate, and their agents will guide you through every step of the home buying process. You can be confident that your first home purchase will be handled by skilled, experienced industry professionals. Call (404) 850-0203 to schedule a consultation, or visit them online to browse their current listings.