Information on earnest money and closing on a home in Columbus and Central Ohio.

What is it? It is a sum of money deposited by the Buyer, to show good faith, held in the Broker's escrow account as a form of security for the Seller. If the Buyer fails to perform on the contract, the money would likely go to the Seller (although there may be additional liability to the Buyer). If the Buyer performs according to the terms of the contract, one of two things will occur

• If a closing occurs, then the money will be returned to the Buyer at the closing.
• If the Buyer has a contingency that allows them to void the contract, then the money should also be returned, unless the Seller disputes the Buyer's actions.

• Earnest money is not mandatory. You need not have it for a valid contract. A contract is valid with no earnest money, as long as both sides agree.
• The Buyer wants the amount to be as small as possible. The size of the deposit is somewhat proportionate to the purchase price. The larger the price, the larger you can expect the deposit to be. In any case, the Buyer would want the deposit to be as small as possible.
• The Seller wants the earnest deposit to be as large as possible. When a home goes into contract, the Seller has effectively taken the house off of the market. The Seller would want a sufficient sum of money deposited to compensate them if the Buyer cannot perform. If the closing is delayed for a longer period than normal, then the Seller would want a larger deposit than normal.
• Amounts to expect: The amount is a negotiable item. Each market will have a different attitude to the amount usually expected.