What is earnest money? Where does it come from and who does it belong to? Who gets to keep it if something goes wrong? Earnest money is good faith money. The buyer puts money down on a property to say, "We are serious about this. We are going forth with this purchase in good faith." It's typically a check that gets written to whomever is holding it. That might be a brokerage, it might be an attorney, it could be the title company.
The important thing is that it's held in a separate escrow account specifically for that purpose and it's bound by a whole lot of rules. So it doesn't go to the seller, they don't get to go grocery shopping with it. How much that earnest money is going to be depends on a lot of factors. So that's a conversation you're going to want to have with your realtor.
It might be more money if you are in a position where you feel like you need to show a lot of strength in your offer, it might be less in certain locations and certain price points. We don't really have a rule of thumb or go by percentage of the purchase price or anything like that, but in each case, we're going to talk to you about what we think is the most appropriate amount to offer, and then the seller might come back and have a different idea and that's one of the points that we negotiate.
So once that check is written, you'll have two or three days that's written into the contract so you'll know what that amount is, to get that to the person who's going to hold it or the office that's going to hold it. When you bring it there, they're going to cash that check and it is not going to be available to you during the period of the contract.
You will get it applied to all of your costs at the closing table. So it's not money that you lose. Speaking of losing, what are some things that might put that at risk? Well, it's pretty rare based on our contracts. Most of the time a buyer will get the earnest money returned to them.
As long as you act in good faith, you follow the rules and you don't try to cheat anybody, you're going to be in good shape. Make sure that you check with your realtor and your attorney anytime there's something that's out of the ordinary or you think you might make a different decision than you started with. We will make sure, particularly your attorney, that you abide by the contract and don't put yourself at risk. And then at closing time, that gets applied to your purchase and that's what earnest money is.