What Is an Earnest Money Deposit?
An earnest money deposit (EMD) is a good faith payment from the buyer, made after a contract is signed. It’s usually held by the title company and later applied to the buyer’s closing costs. If the buyer walks away without a valid reason, you may get to keep the deposit as compensation.
In Kansas City, it’s common to see earnest money deposits between $2,500 and $5,000. If a buyer isn’t willing to put that amount down, it could be a red flag. They may not have the funds or the intention to actually close.
Why Earnest Money Matters
- It shows the buyer is committed
- It protects you from wasting time on someone who won’t close
- It gives you some financial security if things fall through
- It helps weed out unreliable or fake offers
This is especially important if you’re facing foreclosure or need to sell quickly. Sellers in tough spots can’t afford to wait on buyers who disappear at the last minute.
When Is Earnest Money Paid?
Earnest money is usually paid within a few days of signing the contract. It’s held in escrow until closing, and if everything goes smoothly, it’s applied toward the buyer’s purchase. If the buyer backs out for a reason not covered in the agreement, the seller may be entitled to keep it.
A Word of Caution
We’ve seen sellers accept high offers from buyers who promise more money but don’t back it up with earnest money or never close at all. That can lead to devastating outcomes, especially in urgent situations. Always ask for proof of funds and an earnest money deposit upfront. It’s a simple step that protects you and helps you sell with confidence.
