The critical role of earnest money in real estate transactions.
In the ever-changing landscape of the real estate market, positive signs of change are beginning to emerge. With increasing inquiries from homeowners looking to start their real estate journeys, we’re hopeful for a more balanced market. Today, we’re taking a moment to discuss a crucial aspect of real estate transactions: earnest money.
Earnest money, often referred to as a good faith estimate or a deposit, is a vital component of a real estate offer. Simply put, it’s a demonstration of your commitment and seriousness as a buyer. When you’re making an offer on a property, this deposit signals to the seller that you intend to honor the terms of the binding agreement, subject to any contingencies specified in the contract.
In a competitive market where multiple offers are common, earnest money can make your offer stand out. Consider a scenario where a seller is reviewing several offers – one with no deposit, another with a modest deposit of $500 or $1,000, and a third with a more substantial deposit, such as $2,500, $3,000, $5,000, or even $10,000. The larger deposit communicates your commitment and seriousness to the seller.
While real estate practices can vary by state, let’s focus on how deposits work in Ohio, where the seller’s acceptance of an offer triggers the deposit collection process. The deposited funds are held until the closing, providing a form of security for the transaction. If the deal doesn’t close for any reason, the deposit remains in escrow. A mutual release form is required for the release of the deposit back to the buyer in the event of a dispute.
Offering a substantial earnest money deposit has a meaningful impact. It assures the seller that you’re committed to the transaction, even at the risk of losing the deposit under specific circumstances. In a competitive bidding situation, your substantial earnest money could set you apart and help your offer gain an advantage.
As you navigate the intricate world of real estate transactions, remember that earnest money goes beyond a simple financial commitment. It symbolizes your dedication and seriousness as a buyer, making a lasting impression on sellers. If you’re preparing to make an offer or need guidance on any real estate matter, don’t hesitate to call or email our team. We’re here to support you every step of the way.