Earnest Money Deposit (EMD)

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It is one the expected situation where you will be introduced to the term “earnest money deposit” (EMD) when buying properties where in most cases your real estate agent will prepares the offer on your behalf.

An EMD is a monetary deposit submitted (usually via check) to show to the seller that you are serious in buying the property. The deposit is usually made out to the third independent party such as the real estate negotiator’s company. Make sure you understand this clearly and ask your real estate agent for clarification.

The amount of the EMD amount is based on the normal practice for a region however it generally ranges from 1% to 3% of the purchase price. Some sellers might offer higher EMD amount due to the competitive demand for the said property so the best way is to consult with your real estate agent for the best deal that you can afford. Some buyers might ask why the EMD amount is being applied and the answer is – to cover the closing cost that has to be spent by the seller for the involved property.

What’s Next?

Once a valid contract for the particular purchase is created, an independent third-party will hold the EMD until the purchase is completed or cancelled. Coming to this point, the paid money belongs jointly to both seller and buyer.

Be aware with the terms specified in the contract because it will determine whether the EMD amount will be returned to you or not once you decided to cancel the offer. Make sure you clearly understand the terms and consult with your real estate agent for this matter.

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