Real Estate Term of the Day: Earnest Money
EARNEST MONEY – a deposit made by a purchaser of real estate to evidence good faith (Barron’s Dictionary of Real Estate Terms)
In the State of Colorado, earnest money is typically held in a trust account by either the real estate brokerage or the title company. The amount of earnest money is negotiable but typically between 1%-3% of the purchase price.
Earnest money will usually be provided in the form of a personal check or cashier’s check once the CONTRACT TO PURCHASE is fully executed. Earnest money will be CREDITED to the buyer on the CLOSING STATEMENT and the amount needed at closing will be reduced by that amount.
However, if the buyer has a Right to Terminate and timely terminates, buyer shall entitled to the return of Earnest Money as provided in the Contract to Buy and Sell Real Estate.
See also: DOWN PAYMENT