You have found the perfect property in Summit County or Park County! You're ready to buy. An earnest money deposit is (or should be) a part of any formal purchase agreement or real estate sales and purchase contract. When a formal offer to purchase a property is made, it should be accompanied by an earnest money deposit check. The earnest money deposit helps build trust between the buyer and seller and assures both parties are acting in good faith or are "earnest."
In general, an earnest money deposit should be less than 2 percent of the total purchase price. It is important for the buyer to demonstrate a sincere intent to purchase with an earnest money deposit, it is also important to protect the buyer.
An earnest money deposit paid by check may require documentation from the bank that the check will or has cleared. When a buyer and seller agree on the terms of a real estate sale, an earnest money deposit is most often placed in an escrow account with the Title Company. When a property sale closes, the earnest money deposit is usually applied to the buyer's down payment and closing costs, or just deducted from the total proceeds the buyer has to bring to the closing.
An earnest money deposit is a type of insurance until the sale is completed or canceled. Ask Justin and Krystal Knott with LIV Sotheby's International Realty to explain to you under what conditions the buyer must forfeit an earnest money deposit to the seller or a seller must return the earnest money deposit in full to the buyer. The original sales and purchase contract should spell out the conditions under which all or part of an earnest money deposit should be returned.
Need more information? Justin and Krystal Knott at LIV Sotheby's International Realty will explain this and other real estate terms in detail.