Agent: The Importance Of Being Earnest

The purpose of earnest money is to protect the seller in exchange for taking the house off the market. This tacit agreement indicates that the buyer is trying to purchase the house in good faith.

Yet experience proves, buyers pull out of deals all the time. We recently had a deal with a total EM of $1,400. The day before closing, the buyer defaulted. We only had $1,400 to protect the seller. Worse, the buyer refused to sign the mutual termination agreement and the agent cannot re-list the property until that document was in hand. The end result? We had to repay the $1,400 to the defaulting buyer just to get the home relisted. What a scam!

As a seller's agent, it is important to try to secure at least $5,000 in earnest money for your client. Anything less should be highly scrutinized. A higher amount of earnest money will help deter last minute cancellations and compensate your client if the buyer does default.