Is there a rule of thumb figure that you all are using for earnest money? I want to put up enough to let the seller know I’m serious without coming out of pocket too much. I’ve heard that 1-2 % of your offer price is pretty solid. What do you think?
That sounds about right for up to 100k. I wouldn’t think you would need to put more than $1,000 in earnest money to be considered serious. A $1,000 is $1,000 and it is lost if you don’t follow through on the contract.
Earnest money can be as little as $1.00. There is not set amount or percentage. You just have to have earnest money to make the deal. If the seller believes your earnest money amount is too low the seller can counter requesting more earnest money. I usually do $100.00. Most of the objections come from the real estate agent, rightfully so, he is acting in the best interest of the seller and wants to make sure he has a serious buyer. I find that most MOTIVATED sellers and agents are not concerned with the earnest money as long as you have a loan commitment letter. However, if you ask the average real estate agent he will tell you to put down $500.00,Just remember there is no set amount…
Earnest money is not required for a binding contract. It is the real estate agents that will tell you it is required.
The seller will know you are serious when you submit a purchase offer with no contingencies, you are prepared to close quickly, and, you already have your funding in place.
Thanks Dave T., for clearing that up. You are totally correct. I mis-spoke. You do not need earnest money to make the deal… However, under many listing agreements, a seller will require a real estate broker to obtain a reasonable amount of earnest money sufficient enough to discourage buyers from defaulting. Again, like Dave pointed out this will be insisted on by a realtor. So if you buy through a real estate agent be prepared to put down some amount of earnest money. I called six agents in this area and each one of them told me they will advise their seller not to even consider any offer that does not have earnest money. Again, thanks Dave for the correction…