EMD is NOT the down payment on the property ... it's the good faith deposit. 1% is very normal here with 2% being very generous. The Buyers Broker holds the EMD funds in escrow at least until the offer is accepted, then it MAY be transferred to the listing broker if required by the purchase agreement.
The EMD can be used toward the down payment or in any other way that funds may need to be directed during the closing. They can be directed toward the closing costs, down payment, or even refunded to the buyer if there are seller concessions to cover closing costs and no other funds are required from the buyer.
I have often seen the EMD or at least a portion of them go back to the buyer at closing.
The EMD is paid PRIOR acceptance but can be negotiated to any level (that both parties accept) once the offer is placed. Any more than 1% in EMD to start the process would be overly generous. I recently had a $435,000 cash transaction where the seller requested 10% down upon acceptance but only 1% was placed in EMD to submit the offer prior acceptance. The 10% was paid into the buyers brokerage escrow account within 24 hours of the acceptance and held there until the closing. Higher than 1% to 2% in EMD, is overly generous while placing the original offer. Often, on short sales and bank owned properties, I see in the purchase agreements that that the EMD is payable upon acceptance, with nothing paid at the time of the offer.
Keeping in mind, that until the offer is accepted, nothing is binding. Any requirements attempting to bind either party to anything, simply do not exist. As long as nothing in the agreement conflicts with the law, anything that both parties accept is fine. The only true requirement is; all disclosures must precede the offer documents. All Seller Disclosures, Lead Based Paint Disclosures and Agency Disclosures must be signed PRIOR to either party signing the purchase agreement.
EMD can be any amount or item of value for offer consideration. I even know of one sale a couple of years go that a boat was held as EMD. I do not ever recommend such an EMD, but it is a legal consideration if both parties agree to it.
Wes Brooks - Full Time Professional Realtor
Put the most down at contract signing that you can so the seller will no your are invested in purchasing the property.