If you have never bought a home before, there are many aspects of the process that can be confusing. One of the concepts that you may not have ever heard of before is earnest money.
Realtor explains earnest money is cash put down when you make your offer. It is not mandatory, but it can be beneficial for a couple of reasons.
Seller’s market boost
In a seller’s market, there are more buyers than homes on the market. This allows sellers to be more selective about the offers they accept. It also means you have more competition for the home you want. By putting down earnest money, you can show a seller you are ready and committed to buying. It makes your offer look more real and solid, which could help swing things your way and get you in the home.
Respect of time
Putting earnest money down also gives you time. Once you make your offer and the seller tentatively accepts, it stops all other action on the sale. You get time to look more closely at the property. You get time to think about the purchase and consider if there are issues with the home without having to worry the seller will find another buyer. By putting down earnest money, you let the seller know that you respect you will take time away from them and the selling process.
Earnest money is not something you must pay. But it can be beneficial in a seller’s market when things are quite competitive. In a buyer’s market, where there are more homes than buyers, you probably do not need to put it down. Still, if you really want a property and worry about the seller accepting your offer or someone else securing it, then earnest money can sweeten your offer and increase the chances the seller will select you.