When buying a home, especially for first time buyers, there can sometimes be unexpected expenses. One way to avoid these is by taking a first time home buyer class. Many cities,
What is an Earnest Money Deposit? Don't be caught by surprise.
Dated: February 4 2020
When buying a home, especially for first time buyers, there can sometimes be unexpected expenses. One way to avoid these is by taking a first time home buyer class. Many cities, including Atlanta, have programs available. These classes can help inform you on the home buying process, in order to avoid unpleasant surprises.
One up-front costs that can catch buyers by surprise is the Earnest Money Deposit.
According to James Chen, writing for Investopedia, "Earnest money is a deposit made to a seller that represents a buyer's good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. In many ways, earnest money can be considered a deposit on a home, an escrow deposit, or good faith money."
In Georgia, this deposit is generally at least 1% of the purchase price. So, for a $250,000 property, a reasonable earnest money deposit would be $2500. In a competitive market, a higher earnest money deposit can be a good way to make your offer more attractive.
This deposit is generally due within a few days of an offer being accepted. It is separate from your downpayment, but does go toward your purchase should the deal close. It is held in an escrow account by a holder agreed upon by the buyer and seller. It shows the seller that a buyer is serious about the purchase. It can be refunded to the buyer if he or she withdraws from the contract during the due dilligence period.
Be aware of this cost, especially if you are using a down payment assistance program. These programs often do not cover the Earnest Money deposit, but the deposit can count toward any out of pocket expense requirements a participant in these programs may be required to meet.
Clint has been based in the Metro Atlanta area for over 20 years. After spending 2 decades in the entertainment industry, his experience buying his first home inspired him to get his real estate lic....