First time home buyer series. How much earnest money do I need?

So you've decided to buy a house.  You know what earnest money is, so your next question is, how much do I need?

There is no set answer.  The reality is if a seller would agree your earnest money could be nothing at all of $1.  However, few sellers are going to feel comfortable taking their home off of the market if you don't have any skin in the game so, what should you offer?

Your Realtor may have suggestions on the customs in your exact area if you are in a different state than I practice.  Here in Washington it is fairly common to make earnest money be 1% of the purchase price of the home.  So the amount will depend on the price of the home you are buying.  a $100K home would be $1000 in earnest money with this formula.  For a $250K home would be $2500 would required.  Does this mean you must follow this rule?  Does it mean you should never offer more or less?

No.  This is just one way to do it.  Again earnest money is what ever you agree to ( and area able to) give and what the seller will accept.  I have written offers with as little as $100 in earnest money.  Problem is it's hard for a seller to think you are serious if you are only willing to risk less than you likely  spend on a trip to the grocery store.  My opinion $500 is your bare minimum.   I have had many offers go through where this was the earnest money amount.  Most sellers are more comfortable with at least $1000.  I urge my clients to give at least that much unless there is no way that they can.  In most cases however, you might want to save for a bit if you are having a hard time coming up with $1000.

Are there times where you should offer more earnest money?  Yes.  For one thing if you can come up with it and you make an offer and the seller counters asking for more earnest money and you want the house then it may be a good idea, depending on the other terms of the offer.  ( of course if you are my client I will help you walk through how this should be handled)  Another time to offer higher earnest money is when you know you have a pretty good chance that you are competing with another offer.  Perhaps the only thing that makes your offer stronger is the earnest money and if you are in a position to offer more then it would be a smart move.

From Anna Matsunaga, Team Momentum, Keller Williams Realty Tacoma
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