Hey! What Happened to MY Earnest Money?!
Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?
What? Just trust us right? 
Absolutely not, know, check and follow where your purchase earnest money goes, stays and is held.
I don’t know a first time home buyer who does not ask this question. Heck, many multiple time home purchasers STILL ask this question.
According to Wikipedia:
Earnest Money – an earnest payment(sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.
When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.
An Earnest Money Deposit (EMD) is held by a third-party escrow company according to the terms of the executed purchase contract. Well, sometimes at least. The fiduciary responsibility is to deposit the money in the right place, doesn’t always happen, so watch your back.
*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.
The Process:
- Earnest Money is submitted to an escrow company with the accepted purchase contract
- At the close of escrow, the EMD is credited towards the down payment and / or closing costs
- If there are no closing costs or down payment, the the EMD is refunded back to the buyer
Who Doesn’t Get Your Earnest Money:
- Selling Real Estate Agent – A conflict of interest
- Sellers – Too risky
- Buying Agent – They shouldn’t have your money in their account
Regardless, make sure you are actually approvable before you start cutting checks please! Just because a large local bank issued a pre-approval doesn’t mean you can get a loan.
Never under estimate the incompetency of the person on the other end of the phone.
If your in California, talk to Brad please. Unlike a lot of other loan officers he’ll tell you if your chances of getting a loan are slim.
If you are an Atlanta FHA, FHA 203K or Jumbo Mortgage borrower we’ll do the same.
In fact that 1/8th of a point could cost you $5000 in Earnest Money of you don’t close on time. By the way 30% of mortgage transactions don’t close AT ALL.
This business ain’t easy, choose your loan officer wisely.
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