Did you know that home values skyrocketed by 20% last year? The real estate market was a hot one, with lots of competition for homes. And while the industry is predicting it will cool down slightly, it’s still a seller’s market with possible bidding wars as potential buyers compete.
If you are thinking about buying a home this year, it’s important to do your homework first. Learn about terms like earnest money, which might act as a deposit. Check out some of the top things to know with this guide.
What Is Earnest Money?
Once you’ve found a home and made an offer, you will need to sign a purchase contract. And once the seller has accepted the offer, Â you will need to put an earnest money deposit down in order to secure the deal. This is a show of good faith between the potential buyer and the seller that the deal with go through.
How Much Is It?
Typically, the earnest money is 1 to 3% of the price of the property. It’s important to know that there is no fixed number and that it is negotiable between the two parties. Depending on the market, this may work in the buyer or seller’s favor in who has more power in deciding the amount.
Down Payment vs. Home Deposit
Many people confuse earnest money with a down payment, but these are two different things. Earnest money is put forward after both the seller and potential buyers have signed the contract, while a down payment goes to the mortgage company if a mortgage is needed for the purchase.
Is the Deposit Refundable?
Before you sign a purchase agreement, it’s important to read the terms carefully so that you don’t lose your deposit. Ensure that there are ways to receive a refund in the contract in case something goes wrong with the house inspection, etc.
Closing Costs
When buying a house, there are many different costs associated with the purchase called closing costs. Some of these are paid by the seller, and some by the buyer. Luckily, the earnest money goes towards the purchase of the home and is deducted from the sale price.
After Closing
And once you’ve closed on your property, your homeownership journey is just beginning. Do your research and check out some of the top articles and sites for new homeowners online. Then you’ll get a better overview of some of the things you’ll need to know.
Learn More About the Home Buying Process
Now that you’ve read about earnest money and some of the other top real estate terms, don’t stop there. Learn more about the home buying process so that you’ll be prepared when it’s time to make an offer on your dream home. And if you have more questions, don’t be afraid to work with a real estate broker near you!
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