Those considering including a good faith payment with the offer to make it look more attractive will want to put up enough money to seem serious, but not so much as to put excess capital at risk. In a market as competitive as today’s, the addition of cash with an offer could go a long way in beating out the competition. At that time, the seller will pull the home off the market and take on financial risk, so it’s only fair that that buyer puts some “skin in the game.” That said, there’s no reason prospective buyers couldn’t include the funds with their initial offer. More often than not, the cash is delivered to sellers when the impending buyer signs a purchase agreement. If the deal falls through, the seller is entitled to keep the money if the previously agreed upon criteria are met. Upon closing the deal, the seller will return the cash to the buyer. As a deposit, the payment is held in an escrow account until the deal is complete. In return for taking the home off the market (and risking a financial hit), the buyer will provide an earnest money payment which is typically equal to 1% – 3% of the sale price. If for nothing else, the seller needs some reassurance that the buyer will follow through with the purchase. Otherwise known as a good faith deposit, earnest money is essentially a safety measure put in place to protect sellers after each side of a real estate transaction enters into a purchase agreement. Earnest money is a deposit made on behalf of prospective homebuyers to express their sincerity in following through with a purchase.
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