Earnest money is a great way to let a seller know your interest in a property. It is like a promise that you will buy.
Putting down this money is not a requirement, but if it is a seller’s market, then it can go a long way toward helping you get the home you want.
Benefits for you
The benefits of earnest money, according to Realtor, are that it makes your offer look more serious. It also goes toward your down payment once you close the deal.
Benefits for the seller
But the main reason to use earnest money is to benefit the seller. Buyers can make offers on whatever homes they want, even if they do not have any intention of buying. When a buyer puts in an offer, it stops all activity until the buyer backs out or makes the purchase. Meanwhile, other buyers are out there buying homes, but this seller has to sit by and wait. Some sellers understand this and therefore only take offers from buyers who look like they will go through with the deal. Giving earnest money will show you have good intentions and make you stand out from any other offers.
The market will often dictate how to use earnest money. If it is a buyer’s market, sellers may be more apt to skip the earnest money. But when the market is saturated with people wanting to buy, earnest money can give you an edge to get the property you want. How much you put down also depends on the market. Aim for about 1% minimum.