What Is Earnest Money and How Does It Work in San Jose?

When you make an offer on a home, you may be asked to provide earnest money. This is money deposited as part of the purchase process and can show that you are serious about buying the property.

Understanding how it works is important before making an offer.

What Is Earnest Money?

Earnest money is a deposit made by the buyer after the purchase agreement is accepted, subject to the terms of the contract.

It is generally held in escrow and may later be applied toward the buyer's purchase costs.

Is It the Same as a Down Payment?

No.

Earnest money is a deposit connected to the purchase contract. The down payment is part of the money used to purchase the property at closing.

The amount and handling of earnest money depend on the contract.

Can I Lose My Earnest Money?

It is possible.

If a buyer cancels a transaction in a way that is not protected by the contract, the deposit could be at risk.

This is one reason buyers should understand their contingencies, deadlines, and contractual obligations.

How Much Should I Deposit?

There is no single amount that applies to every San Jose transaction.

The amount can depend on the property, offer terms, market conditions, and negotiations between the buyer and seller.

Your agent can help you understand what is customary for the transaction.

What Happens at Closing?

If the transaction closes and the contract allows it, the earnest money is generally credited toward the buyer's purchase costs.

The exact treatment depends on the purchase agreement and escrow process.

Final Thoughts

Earnest money is an important part of many home purchases.

Before making an offer, understand how much you are depositing, where it will be held, what deadlines apply, and the circumstances under which the deposit could be returned or placed at risk.

Mariela Velazquez
Real Estate Expert in San Jose CA
Helping Home Buyers Move with Confidence
(408) 849-9297
www.move408.com