Earnest Money Deposit

When selling your home, you should take your time in qualifying bids. You may get a good number of offers, but which ones are solid?

Before putting up your home for sale, you may want to learn more about the Earnest Money Deposit (EMD). This type of payment will protect you from nuisance buyers or those who are not serious about purchasing your property.

The Earnest Money Deposit is a payment made by the buyer once the seller of the property has accepted his offer.


The payment is an act of good faith; a sincere gesture that validates the legitimacy of the offer and the desire of the buyer to purchase the property.

For this reason, the Earnest Money Deposit is also referred to as a Good Faith Deposit.

4 Things To Know About The Earnest Money Deposit

If a prospective buyer offers to give an EMD, do not immediately agree. Like all agreements, you have to know what you are getting into. It is not simply an act of receiving payment or a deposit for your property.

The standard EMD should have qualifying conditions that are agreeable to you. For example, do you know how much you should receive to qualify as an EMD?

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Here are 4 things you need to know about before agreeing to an EMD:

When Should a Buyer Propose an EMD?

The standard practice in the real estate property market for submitting a proposal for an EMD is within 3 days after the seller has accepted an offer for his property.

However, some buyers are ready to offer an EMD immediately after the seller of the property has agreed to the purchase price.

Minimum Acceptable Amount for an EMD

The amount of the EMD will range from 1% to 3% of the agreed- upon purchase price.

For example, if the seller agrees to the offer of $600,000 for his property, the amount of the deposit for the EMD could range from $6,000 to $18,000.

If there are a lot of offers for the property, a buyer could move to increase the amount of the deposit to entice the seller to prioritize his offer.

What is the Mode of Payment for a EMD?

The standard practice when issuing payment for the EMD is either through wire transfers or cashier’s checks.

Should you accept personal checks? If you know the buyer and are confident of his financial history, you may accept a personal check as a form of payment.

What is the Status of the EMD

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The amount of the EMD shall remain in full until the sale of the property has been finalized.

Depending on the property laws of the seller’s state, the EMD could be held in an Escrow account or deposited in trust to the seller’s attorney.

• Once the sale is consummated, the amount of the EMD is applied to the buyer’s down-payment for the seller’s property.

• The EMD will be returned to the buyer if he does not qualify for the Mortgage Contingency Date or if the seller changes his mind and foregoes the sale of his property.

• However, if it is the buyer who backs out of the agreement and his reason(s) are not covered in the P&S, then the EMD shall be released in full to the account of the seller.