My word is my bond! That expression held great meaning to land buyers and sellers in the “olden” days. Most real estate sales were made with a handshake, and a verbal promise to complete the transaction at some future date.
Later, as a show of their good intentions, buyers would give sellers a sum known as “earnest money” to be held until the sale was consummated. This deposit had more ceremonial significance than monetary assurance of a completed sale.
Today, earnest money deposits are a part of most every real estate transaction. The amount used as a deposit is negotiable between buyers and sellers, with no minimum or maximum required by law.
There is, however, a strong message attached to the amount of money tendered by buyers. As the saying goes, “Money talks!” If sellers are presented with two identical offers on their home, one with a $10,000 deposit, and the other with $500, which do you think they are most likely to accept? Sellers believe the higher deposit indicates buyers who are more qualified to complete the purchase.
Having said that, understand that earnest money is just one factor to be considered when buying or selling a home. The amount of the deposit is relative, and depends on the unique nature of each property. Detailed information about earnest money deposits is available from the real estate agent you choose.