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Answer: Earnest money is a deposit on a house you want to buy. It’s used to show sellers that you are “earnest” or very serious about buying their home. It should be substantial enough to demonstrate good faith. Without earnest money, anyone could make offers on many homes, essentially taking them off the market until a homebuyer decided which one they liked best. Sellers rarely will accept offers without earnest money, so you can expect to put down between 1-5% of the purchase price depending on local conditions.
If all goes well and you buy the house, earnest money goes toward the down payment and closing costs. In many circumstances, you could get most or all of your deposit back should you find something about the house that voids your offer. In order to further clarify earnest money and how it is handled, be sure your purchase agreement dictates the details of any scenario. Your Shorewest real estate agent can help you navigate the home buying process, including everything involving earnest money.