In this video blog, Robert Brown explains what Earnest Money is. Earnest money is an essential part of Utah Real Estate transactions.
When a buyer makes an offer on a house, they put down a “good faith” dollar amount. This shows the seller that they are serious about the house, and that if they back out of the contract for an unauthorized reason, they will lose their earnest money.
For Real Estate in Cache Valley, earnest money is typically $500 for starter homes, or about 1% of the purchase price for other homes. Sometimes for foreclosure homes, banks will specify a certain minimum requirement of earnest money. If you offer a lesser value of Earnest Money, sellers may question your commitment and ability to actually pay for the home. A higher earnest money value really shows the sellers that you are serious about your offer.
In the Real Estate Purchase Contract, there are several circumstances where buyers may back out of the contract, without losing their earnest money. These include, home inspection, due diligence, and inability to obtain financing. The catch is that if the buyer is going to back out of the contract, they need to give the seller written notice by the deadlines set in the REPC. If a buyer cannot fulfill, or chooses to back out of a contract after the deadlines, they will likely lose their earnest money.