Earnest Money Deposit (or EMD) means you are putting some money forward when you write a contract to purchase a home. When a home is listed in the MLS, the amount the seller is requesting is on the listing sheet. Everything in real estate is negotiable but you want to try to get as close to the seller’s number – when you are writing an offer on a Home – as possible.
The check is presented with the offer but is not cashed (generally) until an offer is accepted and fully executed (both buyers and sellers have signed agreements.) I have to sign that the check is in my possession on the board offer so I cannot submit the offer without your EMD check or I could be subject to a fine by the real estate division. There are alternatives that I can sign on to submit an offer but your offer does not appear to be strong to the seller if you are making no effort to write out a check and place it in the possession of your agent. (Note: This rule may not apply in locations outside of my market area.)
What if I back out of the sale – will I get my Earnest Money Deposit refunded?
It depends. If you are within your due diligence time frame and you are backing out due to a contingency that you could not fulfill, you should receive an EMD refund.
You should always check with a lawyer BEFORE you sign a contract and when you are backing out of a contract for an unsatisfied contingency.
Typically in real estate, the earnest money is applied to the purchase price. You are not “losing” that money when you close. It will be applied to your down payment or closing costs and if the EMD amount exceeds your down payment or closing costs, the excess will be refunded after closing of escrow.