What is "earnest money" and how much should I put aside...any resources here would be great.?

Asked by Rhayward, Brooklyn, NY Thu Mar 7, 2013

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Mitchell Fel…, Agent, Brooklyn, NY
Thu Mar 7, 2013
Dear Rhayward:

That is the monies that you as a buyer would put down when you sign the contract of sale with your attorney. This amount is usually negotiated just like the price. Traditionally speaking in Brooklyn, this amount would usually be 5% to 10%. That is unless your down payment is less than 5% such as an FHA type mortgage where you can put as little as 3.5% down or a SONYMAE type loan where you can put as little as 3% down. Military veterans can buy a house and get a mortgage with no money down, however, in a traditional deal in Brooklyn the seller would still want you to put down some sort of earnest money (even if it is a flat amount like say $5,000).

The purpose and reason for earnest money is that is serves as a guarantee to the homeowner/seller that the buyer will not breach the contract and/or try to get out of the deal with undue cause. If the purchaser breaches the contract, the seller would be entitled to keep the earnest deposit as damages.

If I can be of further assistance, please let me know. Good luck!

Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Email: MitchellSFeldman@aol.com
1 vote
Michael Denn…, Agent, Queens, NY
Sun Mar 10, 2013
Rhayward, my colleagues have already provided excellent explanations of earnest money and good faith. I strongly suggest that you discuss the amount of your deposit with your attorney. Here's why:. you can lose your deposit (or may have to sue or negotiate to get it back) if the deal blows up and the seller feels that you did not act in good faith throughout the mortgage application and closing process. Generally, I think it's best for a buyer to deposit on contract only as much as is needed to show the seller that they are genuine (acting in good faith). But this amout is subject to negotiations.
For more information or assistance, I can be reached directly at 917.699.0183. Follow me on twitter @mdenniston247.

I value your feedback, please hit the thumbs up if my reply was helpful. All the best.

Michael Denniston l Cell: (917) 699-0183
Residential Home Funding, Corp.
Licensed Mortgage Loan Originator l Sales Manager
6901 Jericho Turnpike Ste. 219 | Syosset, NY 11791
Main: (516) 605-1733 | Fax: (888) 881-2557
NMLS # 24076 | Company NMLS # 34973
1 vote
Kyle Borut, Agent, New York, NY
Sat Mar 9, 2013
Hi Rhayward,

Another way of thinking about earnest money is "good faith". It's a gesture that's completely negotiable as a side-concern between seller & buyer, so an exact number is hard to come up with. I would typically estimate at least a 5% earnest deposit as a strong gesture of seriousness.

Kyle Borut
Oxford Property Group

0 votes
Anna M Brocco, Agent, Williston Park, NY
Thu Mar 7, 2013
Earnest money is the deposit/downpayment for the property one wishes to buy; it is given to one's attorney at contract signing; the amount will depend on the type of loan one qualifies for; FHA loans require a minimum of 3.5% down. For specifics visit with any licensed loan officer, be aware that a mortgage pre-approval letter is required in order to determine your price range and for any offers to be taken seriously.
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