What is the purpose of earnest money?

And who decides how much it is? I just received an offer on my home w/ $500 in earnest money. My agent didn't discuss it at all with me. No one asked me how much I required. When I bought it I put down $150 6 years ago.



Now that I am looking for a new house my agent won't give me a straight answer as to how much I will need to pay. She said $500-750, then she said 1%, then she said $1000.



As far as it showing that you are serious about buying the house, get real. How does $500 show that you can buy a home over $100,000?



Thanks!What is the purpose of earnest money?
Earnest money is only to show that you're serious about buying a property. If you're the buyer, you will lose your earnest money if you breach the contract. If you're the seller, you would keep the money if that was the case. The buyer is going to want to put up the LEAST amount possible while still securing the deal. $500 is usually the going minimum where I'm from. There is no ';set amount';. When i'm working with a seller, I'm going to want as much as possible from the buyer (within reason). If i'm working with buyers, i'm going to want to put the least down for earnest money in an effort to lessen the risk on my buyers. Bottom line, there is no set amount. Earnest money is negotiable as well. $500 for a $100k home is reasonable, but if the deal isn't very strong you can always ask for another $500.

I wouldn't push it too hard though. If the deal seems strong, just go with the $500. You don't want to discourage a buyer in this market. Might be a while before your next offer if they were to back out. Hope this helps!!What is the purpose of earnest money?
There is no set requirement or general rule of thumb for earnest money. I have purchased a home for $155,000 with $100 in earnest money, and I have purchased commercial property for $300,000 with $250 in earnest money. The amount will depend on how much the seller trusts you, the broker, your credit history, etc. It basically comes down to what amount the seller is willing to accept to keep the house off the market and under contract for a certain period of time. Usually, the longer the contracting period (30-, 60-, 90-days, etc.) the larger the amount of earnest money. It also depends on how much you are willing to risk upfront to get the deal closed.
Your agent is playing around with you get a new agent
There is no ';set'; rule but in my opinion $500. is not enough on a $100,000. home. If I were the seller, I would insist on just as damn much as I could squeeze out of them.
LT, first of all I would fire your agent for not communicating with you when you ask a question. They have a LEGAL obligation to keep your best interest first. And you're doesn't sound like they are doing that.



To answer your question, earnest money is a show of good faith or commitment on the part of the buyer to purchase your home. While $500 doesn't sound like much money, it may be the normal amount for your area. Here in Minneapolis it is depends on the value of the property, but $2000 is common. If you are not comfortable with the earnest money, and have not signed the agreement, I would ask for $1,000 to $2,000.



I would use another agent to purchase a new home at this point. I'm not getting a warm fuzzy feeling about your agents abilities to handle this transaction. Don't be shy or ashamed to tell them that too. You also have the right to contact their Broker if you feel things are going the way you think they should.



Best of Luck!
I would think the $500 was just money to take the house off the market, so no one else could place an offer. Tell your realtor that now you want their earnest money deposit, which can be money that shows they are sincerely interested in your house.

This could be anywhere from 2.5% -20%.

I am sure they knew that a substanial deposit would be required when they went house hunting.
If I were you I would ask for more then $500 dollars in earnest money. Someone buying your house could come across another home they like more and come on 500 dollars isn't that much to walk away from. I would want at least $1000 to feel confident in taking my home off the market.

I';m buying a house for $165,000 and was going to put $1000 dollars as an earnest deposit but the seller wanted me to put down $5000 dollars as an earnest deposit because he was then confident I wouldn't walk away...