First time home buyer questions-What is earnest money?

If you are a first time home buyer the whole process of buying a house is....well rather intimidating and complicated.  Heck, I've been a Realtor(r) for a decade and I still have to say it's rather complicated.  That is why my clients need me.

One of the things that can be overwhelming for a first time buyer is the simple fact that there are many terms that they don't understand.  So If you are thinking about buying a home, pull up chair, in the next few posts I am going to define terms so you are clear about the process and what it means to you.

Today's topic, Earnest Money.

First off what is it?  Earnest Money is just that, money that you put up to show you are earnest.  You really do want this home and you are willing to risk that money if you were to decide not to buy the home you are making an offer on.  Does this mean that the money is just gone?  NO.  This means that unless you have legal excuse you do not get this money back if you decide not to buy the house.

So what reasons could you have to not buy the house and still get your money back?  That will depend upon how your offer is written.  Some common things that make it so that you still get your money back even if you don't buy are: The house fails inspection, The neighborhood does not pass a neighborhood review, or financing fails.  There are plenty of other possibilities and the 3 proceeding are likely the most common.  These are call Contingencies.  This means that you buying the home is contingent upon these things working out.  ( ie the house passes inspection, your financing goes through and so on)  Any good offer for a first time buyer will have contingencies of some sort to protect you and your earnest money.

Next post will answer the question- how much earnest money do I need?


From Anna Matsunaga, Team Momentum, Keller Williams Tacoma

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