How much is generally put down as "earnest money"?

[Ultrarunner]

Bought a lot of property with the same agent/broker.

She would never let me put down more than $1000 to get the ball rolling.

Upon acceptance, the deposit would be increased. Others I have used preferred the deposit be held un-cashed pending acceptance.

My agent had decades of experience and didn't want to see my money get tied up/delayed.

I know more than one occasion with people I know where it was very time consuming and even required a lawyer to get the deposit returned. The seller passed away and it was unclear who had authority...

A local Broker caused a scandal when he took money from the in house escrow account for personal use...

Ever since then... I've always made my deposit checks to my favorite Title Company to be held pending acceptance.

The short answer is Real Estate is based on local customs...

[middle-aged mom]

$1000 with the initial written offer is common stuff in my neck of the woods with a balance due at the end of the attorney review/inspection period. Balance due can and does range from 1-10%. It all depends.

[AnywhereElse]

We took a $100.00 earnest money on the house we sold this summer. I was told that in our current city, properties selling for under $100,000 usually put up $500.00 which is what we did last week on the cash purchase. We live in a lower income area. A lot of houses sell for under $100,000.

[RE Skeptic]

Originally Posted by Minier

My second question on what is "standard"? Reading around, I'm seeing $1k-$5k ... then I see things like 10% of offer price, which can be as much as $40K - so, which is it? The range can't be that wide, right?

EM varies by region and the type of standard contract used in your state but I NOT offer 10% EM. I think sellers are most interested in the offer price and view the EM as a second tier negotiating factor. If your offer is in their range, they are unlikely to walk away b/c they don't like the initial EM offer. You can always go up on the EM once a price is agreed upon but it is difficult to reduce the EM from the initial offer.

Several other factors to consider:

1) Is the EM in play from the moment the contract is signed or is it a multiphase EM system? Many states have an option period or due diligence period where the buyer puts a small amount of "preliminary" EM ($100-1000) up and has the option to walk (and lose) the money if they don't like the inspection. If they are satisfied with inspection and other contingencies are met (financing) then a second larger EM (1-3%) is paid to escrow. At this point there may be few contingencies left to get your EM back so you are locked in.

2) All things equal, a higher EM will strengthen your offer, but if it is within the regional norm, it is unlikely to be a deal breaker unless there are EQUIVALENT multiple offers on the table. Think about it...if you were selling and had an decent offer price with no other offers in sight, would you risk miffing the buyer by demanding an above average EM?

3) Take your agents recommendations re: EM into consideration but don't take it as gospel. If the deal falls through, they don't lose anything. It is to their benefit to keep you in the game and part of this includes a high EM.

4) The suggestion that a 350k or even 50k EM is within the typical range of EM is absurd. While anything is possible, these are outlier figures.

5) The more liberal the contingencies the higher EM I would be willing to offer and vice versa. If I have 3 weeks to inspect a house and get the EM back if I am "not completely satisfied with the inspection", then I would tend to go higher (if pushed by the seller). Keep in mind that some contracts may not let you out of the contract (retrieve EM) even if you don't like the inspection. It may have to be a major structural defect that immediately threatens the safety of the house to get your EM back. This where a RE attorney becomes very valuable. Your agent may not be able, or forthcoming, in explaining the nuances of what will and will not enable you to get EM back.

[yousah]

It's absolutely something that varies by region. I do find it interesting that there are some areas with very low amounts. If the seller takes their house off the market for a few months and the buyer backs out, then the seller has at least lost the amount of their house payments (interest portion, at least) for that period of time. Not to mention the possibility of the market progressing into a slower period such as from the summer to fall market whereby their house may have gone down in value; so their loss would be even more.

So I can't see why amounts near $1,000 would be advisable unless you're living in a poverty area with very low house values. Also, if the EM is too low then it would never even make sense for the seller to try and sue for recovery of this amount. That's because the legal fees would exceed the amount of the EM itself. So I think with these very low amounts that they're useless from a practical standpoint and indicative of a market where the agents haven't really thought things through.

[LynnKK]

All earnest money is negotiable. Put yourself in the place of the seller. When faced with multiple offers and one with a check for $1000 and the other with earnest money much higher....all things being equal...approval for a loan by a reputable lender, what would you do? The usual practice is to state an earnest money figure to be paid "upon acceptance"....

[Silverfall]

Originally Posted by yousah

It's absolutely something that varies by region. I do find it interesting that there are some areas with very low amounts. If the seller takes their house off the market for a few months and the buyer backs out, then the seller has at least lost the amount of their house payments (interest portion, at least) for that period of time. Not to mention the possibility of the market progressing into a slower period such as from the summer to fall market whereby their house may have gone down in value; so their loss would be even more.

So I can't see why amounts near $1,000 would be advisable unless you're living in a poverty area with very low house values. Also, if the EM is too low then it would never even make sense for the seller to try and sue for recovery of this amount. That's because the legal fees would exceed the amount of the EM itself. So I think with these very low amounts that they're useless from a practical standpoint and indicative of a market where the agents haven't really thought things through.

It depends on whether or not the listing agent has read the contract and market conditions. Out here the EM is the sole remedy for the seller. Typically the listing agent should be asking for a solid amount but some agents have no idea what the contract says.

Market conditions will also dictate. Before the market picked up this fall, sellers didn't have a lot of negotiating power so arguing over EM made little sense as trying to get the price up was more important. Now EM is back in the game as the market has improved so much in my area.