In general in Arizona, the larger the earnest money, the more serious the seller will consider your offer. That is, the more your earnest money, the more attractive your offer.

What is an Acceptable Amount of Earnest Money in Arizona?

Different areas of the country have different earnest money traditions. For Arizona residential resale real estate, I have found that earnest money equivalent to around 1% of the offer price is usually acceptable to sellers. (It’s different for luxury homes.)

Putting down an unusually large amount of earnest money strengthens your offer a bit. However, putting down an unusually small about of earnest money weakens your offer a lot.

Low Balling the Earnest Money

Putting down a small amount of earnest money will often raise red flags in the mind of the seller.

  • The seller may think you aren’t very serious about buying the house and become less flexible in price negotiations.
  • The seller may look at everything in your offer suspiciously if you come in with a suspiciously low amount of earnest money.
  • The seller may worry that you are cash poor and in the end you won’t really be able to buy the home.

Putting down an appropriate amount of earnest money is usually a no cost way to strengthen your offer.

What is Earnest Money?

Earnest money is usually a personal check from the buyer made out to the escrow company.

Before the buyer’s Realtor submits an offer to the seller, the buyer will give the earnest money check (made out to the escrow company) to the buyer’s Realtor to hold with the offer.

If it turns out an agreement can not be reached with the seller, the buyer may instruct the buyer’s Realtor to destroy or return the earnest money check made out to the escrow company.

If, however, an agreement is indeed reached with the seller, the buyer’s Realtor will deliver both the buyer’s earnest money check along with the accepted offer (now a “contract” or “agreement”) to the escrow company to “open escrow.” The escrow company will usually “cash” the buyer’s earnest money check within 24 hours and deposit the money into an escrow account.

At the close of escrow, buyers usually want their earnest money to go toward the purchase of the home.

Can the Buyer Lose the Earnest Money?

Yes, the buyer can lose the earnest money if the buyer breaches the contract. This is, however, rare in my experience.

I, for example, have never had a buyer client lose their earnest money. Similarly, I’ve never had a seller client keep a buyer’s earnest money. Something has to go terribly wrong for the buyer to lose their earnest money.

An important reason to hire a Realtor is to help ensure that you don’t accidently screw up and lose your earnest money.

When a buyer cancels a purchase contract – as provided within the contract itself – the earnest money is usually refunded in full to the buyer, no problem.

Call me if you have any questions about earnest money when buying an Arizona home.

I want to be your Realtor!

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