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Writer's pictureTanner Pile

How to Properly Utilize Earnest Money

Updated: Mar 24, 2022

When you first go under contract to purchase real estate you will likely have a few days to submit your earnest money to the title company to hold in escrow (an account created by a third party to hold funds for a transaction).


Earnest money is used as a deposit to ensure the seller that you are serious about purchasing their property. This deposit must be used towards your down payment or closing costs. In circumstances with VA loans you may be able to have a check written for you at closing in the amount of the earnest money.


In the instance you use a VA loan where you will have zero down payment required, the earnest money can be used for the closing costs owed at the day of closing. Even though the VA allows no down payment and some flexibility to roll closing costs into your loan, the earnest money agreement is with the seller so you will need to pay this amount. Typically it is around 1% of the purchase price. You can put smaller amounts or no earnest money but this may weaken your offer from a seller perspective in the current market.


Now, this is where you add your sprinkles to your offer!!

You can also make your earnest money non-refundable to let the seller know you're serious about buying. The downside to this is you will lose your earnest money if you fall out of contract but it can add a little boost to help the sellers select your offer.



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