How to handle earnest money when working with buyers and sellers.
Q: Who should hold the earnest money check?
A: The simple answer: The Title Company.
Per Key Realty Policy, we do not hold earnest money. The funds need to be deposited with the title company. If both parties will not agree on the title company the co-brokerage may hold earnest money.
Q: How to correctly write the purchase agreement so the title company is holding the earnest money deposit (EMD).
A: The answer will vary by the purchase agreement in your regions. Some contracts have a checkbox to select that the title company will hold funds. If that option is not available, you will need to write in a short clause such as: "Earnest Money Deposit to be held with Title Company."
Q: How much earnest money should I have my buyer offer on the purchase agreement.
A: Again, this varies by region. Typically, an offer price up to $100K, a $500 Earnest money deposit should suffice. Offers $100K+ typically start at $1000 in earnest funds. Remember, everything is negotiable including the amount of earnest money to be deposited. When in multiple offers, offering a strong EMD may help your buyers offer. Read more about working in multiple offers here.
Q: How soon does the earnest money need to be deposited?
A: Earnest money deposit requirements are always In accordance with the purchase agreement. Most purchase agreements specify that the earnest money deposit with a certain number of business days. Typically 2-3. Be sure to fully read the purchase agreement so that you are familiar with the terms and conditions of earnest money.