Zillow Advice: Home Buying - What is the typical amount of ernest money to give with the offer on a roughly $300,000 house?

In Hawaii the norm is $1000 ...

Mon, 29 Jun 2009 02:14:00 GMT

In Hawaii the norm is $1000 to start.

1 %

Sun, 28 Jun 2009 23:03:00 GMT

1 %

The flippant answer would ...

Fri, 19 Jun 2009 23:11:00 GMT

The flippant answer would be: whatever the seller will accept. I have seen some pretty low earnest money accompanying offers: $500 on a $100,000 offer for instance.
I stress to my buyer clients that "earnest" money means just that, and I review the definitions and earnest money contract obligations. I, too, suggest a minimum of 1%, but strongly suggest more: 2-3%.

I consistently see $1,000 ...

Mon, 15 Jun 2009 17:21:00 GMT

I consistently see $1,000 earnest money deposits on $300,000 homes. However, your best bet is to consult your Realtor.

There is no typical amount. ...

Mon, 15 Jun 2009 16:39:00 GMT

There is no typical amount. Earnest money deposit shows how serious you are about buying a property. In other words, earnest money says you are willing to risk losing it if you suddenly get cold feet about buying the property.

Think about it, if a seller gets two identical purchase price offers of $300K, one with a 500 dollar earnest money and the other with 6000 dollar earnest money. Which one would you think the seller would accept? If the sale fails due to breach of contract, the seller can keep the earnest money and the house. If all you have is 500, then put the offer anyway.

A good purchase agreement will protect your earnest money and limit your liability. Earnest money gets refunded to you if the property fails inspections or any other contingency.

Earnest money gets deposited into an escrow account, it is NOT handed over to the listed agent as per our contracts. I can't comment how other agents write their contracts. Don't write a check without having the funds in the bank. This money is used at closing to cover your closing costs. If there is a surplus, then it gets refunded to you.

Have your real estate agent explain this in detail before writing an offer.

Good luck.

I think it varies a bit by ...

Mon, 15 Jun 2009 15:09:00 GMT

I think it varies a bit by area. Where I live now, it is typically 1-2% of the offer amount. I would follow the recommendations of your realtor as they know what is customary for your local area. Earnest money is generally fully refundable, so if your inspections are not satisfactory you risk nothing in most cases. A reasonable amount of earnest money can also make your offer look stronger to the seller.

In the current market, we're usually ...

Mon, 15 Jun 2009 14:13:00 GMT

In the current market, we're usually seeing a 1-2% earnest money deposit, although it's closer to 3% in certain cases. The likelihood of competing offers, length of time on market, and compensating strength of your offer from other factors can affect the need for a large or small earnest money deposit. Your earnest money deposit is telling the seller how serious you are about buying.

You should discuss the pros and cons with your Realtor. The only way to know what is appropriate in your given situation is to have the experience of writing many offers in your market and knowing what gets accepted and what doesn't.

Glenn does it still hold ...

Mon, 15 Jun 2009 04:05:00 GMT

Glenn does it still hold true that the money is immediately deposited (cashed) into the escrow account, or do they handle that differently in Washington.?

I think that's the one thing that people don't think about is that the check will get cashed immediately, instead of at closing.

And thanks for the clarification. I know that the rules vary from state to state. So I was careful to state that in my state, this is what we do. Glad to have my answer amended.

Here in Washington it's a ...

Mon, 15 Jun 2009 03:54:00 GMT

Here in Washington it's a little different. The terms of the agreement dictate what must happen with the EM. In most cases the Selling agent either turns the check over to his broker or to the escrow company depending on the wording in the offer. It is rarely given to the listing agent or office.
Earnest money in the Seattle area is usually 2-3%, but can vary widely depending on circumstances.
For a $300K house in the current market you could probably get away with $3,000-5,0000.

Whatever is 'traditional' ...

Mon, 15 Jun 2009 02:55:00 GMT

Whatever is 'traditional' in your market. Generally (at least where I live) it's 1 to 2 percent of offer price. So for 300,000, it would be $3,000 to $6,000.

Just remember that by law, your earnest money check will be deposited within 3 days of the acceptance of the offer. So be prepared to have the money in the bank. What we do in Minnesota is the buyers agent makes a photocopy of the earnest money check and when the purchase agreement is accepted, they then hand the earnest money check to the the listing agent.

Some listing agents will hold onto the earnest money check until after the inspection period, because to them, that is the acceptance of the purchase agreement .But don't count on this to happen.