Some of the most Frequently Asked Questions in a Real Estate Transaction involve the Earnest Money Deposit. The Earnest Money usually follows with the transaction from day one all the way through to the last day, as in “follow the money”.
The buyer usually writes a check for the Earnest Money deposit at the same time that they sign the offer and they hand it to their Buyer Agent. The check can be made payable directly to the Escrow Company they chose in the contract, or to the Buyer Agent’s Company if they have an in house Trust/Escrow Account. More and more these checks are made payable to the closing agent.
When the seller accepts the buyer’s offer, the check gets deposited. Let’s assume the check was made payable to escrow and went directly to the escrow company for deposit.
At close of escrow this money comes back to the buyer as a credit against his costs or downpayment. If it is a zero down loan and the seller is paying the closing costs in full, this $1,000.00 can be returned to the buyer at close of escrow.
If you know you really want the house when you make the offer, and you have no problems at all throughout the transaction, the Earnest Money just slides like butter from your hand and back into your hand. Whether it actually goes into your hand at the end or is paid against your costs varies from transaction to transaction. But it still simply comes back to you like a boomarang.
The only time you should be worried about handing over an Earnest Money check, is if you are not sure you want the house at the time you make the offer