Earnest Money Deposit
What is an earnest money deposit?
The earnest money deposit (EMD) is the first deposit you make after your offer is accepted. It is usually based on custom and is typically an indication of the buyer’s intent to follow through with the purchase.
Why is the EMD an indication of the Buyer’s intent to follow through with the deal?
The buyer must deposit the EMD with escrow within 3 days. Once the EMD is submitted, the buyer can only get it back if they cancel the deal for a valid reason (the inspection contingency, the appraisal contingency and the loan contingency are the most common). Otherwise, the buyer forfeits their EMD to the Seller if they decide to cancel the deal.
How much is the EMD typically?
In our area, the EMD is typically around 1%. However, buyers will sometimes increase that for reasons explained above. In some areas of the Bay Area, the EMD will be closer to 2%.
How do I submit the EMD?
You can either wire the funds to the title company running escrow or drop a check off at their office.
So, if I cancel the deal for a valid reason I get my EMD back?
You should! The escrow provider will typically not release an EMD unless the parties agree in writing (another form prepared by your agent). The seller can refuse to release the funds, however, that usually leads to a dispute and most sellers would rather get back to market and find another buyer than risk fighting an uphill battle.
