Welcome to Working Moms Realty's blog! We're a Chattanooga, TN-based real estate brokerage dedicated to helping clients get the highest value for their homes. In our first post, we're addressing a common question: "What is earnest money?" Read on to learn about earnest money for buyers and sellers, how it works with escrow, and why it's essential in real estate transactions.
Earnest money is a deposit made by home buyers to demonstrate their commitment to purchasing a property.
It's often required in Chattanooga real estate transactions and helps protect the seller if the buyer decides to back out without a valid reason. This deposit is typically between 1% to 3% of the purchase price and is held in an escrow account until the sale is finalized.
An escrow account is a neutral third-party account used to hold funds during a real estate transaction. In Chattanooga, TN, escrow companies or real estate attorneys often manage these accounts. When a buyer submits their earnest money deposit, it is placed in escrow to ensure the funds are secure and only released when specific conditions are met. Once the transaction is complete, the earnest money is usually applied toward the buyer's down payment or closing costs.
While a real estate contract can technically be considered legally binding without an earnest money deposit, it's generally not advisable. Without earnest money, the seller may question the buyer's commitment and choose to work with another buyer who provides a deposit. Additionally, if a buyer does not provide earnest money, they may find it challenging to enforce their rights within the contract.
Understanding earnest money and its role in real estate transactions is essential for both buyers and sellers. At Working Moms Realty, we're committed to helping you navigate the home buying and selling process in Chattanooga, TN. If you have any questions or need assistance, don't hesitate to reach out to our expert team. Stay tuned for more informative blog posts on essential real estate topics!