Stern Market Minute: Earnest Money
Channel: The Stern Team | KW Salt Lake City Real Estate
Date: 2022-09-17

Earnest money has become a standard practice, particularly in highly competitive real estate markets. In general, earnest money is considered a good faith deposit put down by a potential home buyer to demonstrate their commitment and seriousness to completing a real estate transaction.

One key benefit to earnest money is that it can serve as a guarantee to sellers that their property will not be taken off the market with no intention of being purchased by a potential buyer. This is because even though the earnest money is initially held by a third-party in an escrow account until the transaction is complete, it is still formally considered as being at risk for loss if the terms aren't met.

It is essential to note that after being deposited, the buyer is entitled to a refund up to a certain amount if they decide to pull out of the transaction. The amount of the refund can vary depending on several factors such as the real estate market conditions and the specifics of each individual transaction.

There are, however, some circumstances in which the earnest money will be kept by the seller if the transaction is not completed. This is sometimes called liquidated damages and are mainly used to guard against a potential loss of revenue that the seller might experience because of the buyer's failure to purchase their property.

If you are interested in learning more about the importance of earnest money deposits for real estate transactions, you can watch this informative short video. It covers all the essential details and helps you understand better how to factor earnest money into your overall purchasing plan.

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Joshua Stern
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