1. What is Earnest Money?

Earnest money is a deposit made to a seller showing the buyer's good faith in a real estate transaction. It's typically 1-3% of the purchase price and is held in escrow until closing.

2. How Does the Calculator Work?

The calculator uses the simple earnest money formula:

Where:

• \( Sale\ Price \) — The agreed purchase price of the property
• \( Percentage \) — Typically between 1% to 3% of sale price

Explanation: The earnest money amount varies based on local customs and market conditions, but generally falls within the 1-3% range.

3. Importance of Earnest Money

Details: Earnest money demonstrates the buyer's serious intent to purchase and provides the seller some protection if the buyer backs out without valid reason. It often becomes part of the down payment at closing.

4. Using the Calculator

Tips: Enter the sale price in USD and the percentage you wish to calculate (between 1% and 3%). The calculator will show the earnest money amount.

5. Frequently Asked Questions (FAQ)

Q1: Is earnest money refundable?
A: It depends on the contract terms. Typically refundable if contingencies aren't met, but may be forfeited if buyer backs out without cause.

Q2: Who holds the earnest money?
A: Usually held in escrow by a real estate broker, title company, or attorney until closing.

Q3: Can earnest money be more than 3%?
A: Yes, in competitive markets or for high-value properties, buyers may offer more to strengthen their offer.

Q4: When is earnest money paid?
A: Typically paid when the purchase agreement is signed or shortly thereafter.

Q5: What happens to earnest money at closing?
A: It's usually applied toward the buyer's down payment or closing costs.