1. What is Earnest Money?

Earnest money is a deposit made to a seller showing the buyer's good faith in a transaction. It's typically a percentage of the purchase price and is held in escrow until closing.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Purchase\ Price \) — The agreed price for the property
• \( Percent \) — The percentage required as earnest money (typically 1-3%)

Explanation: The calculation converts the percentage to a decimal and multiplies it by the purchase price to determine the earnest money amount.

3. Importance of Earnest Money

Details: Earnest money demonstrates the buyer's commitment to the purchase and may be forfeited if the buyer backs out without contractual cause. The amount can vary based on market conditions and local customs.

4. Using the Calculator

Tips: Enter the purchase price in dollars and the earnest money percentage (typically between 1-3%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical earnest money percentage?
A: Typically 1-3% of the purchase price, but can vary based on local market conditions.

Q2: Is earnest money refundable?
A: It depends on the contract terms. Typically refundable if contingencies aren't met, but may be forfeited if buyer backs out without cause.

Q3: Who holds the earnest money?
A: Usually held in escrow by a title company, real estate broker, or attorney until closing.

Q4: Can earnest money be applied to the down payment?
A: Yes, earnest money is typically credited toward the down payment or closing costs at settlement.

Q5: What happens to earnest money at closing?
A: It's applied to the buyer's portion of the closing costs or down payment.