What is an EMD?

April 15, 2014

What is an EMD?

 

The earnest money deposit or “EMD” is an important part of the home buying process. It lets the seller know you are a committed to purchasing their property. It will be applied to your down payment on the HUD-1 Settlement Statement at the time of closing. Without an earnest money, you could make offers on several homes at the same time, essentially taking them off the market until you decided which one you “liked best”. Because of that, the Northern Virginia Regional Sales Contract requires an Earnest Money Deposit to be included when you submit your contract. Sellers rarely accept offers without deposits.

 

How Much Should You Put Down in the Earnest Money Deposit?

 

The amount you’ll pay for the earnest money deposit will depend on a few factors such as the current real estate market and what the seller requires. While this is completely negotiable, on average you can expect a seller to want approximately one percent of the total purchase price as earnest money. Remember that in our current market, the higher your EMD ~ the more attractive your offer becomes to the seller. In some real estate markets you may end up putting down more or less than the average amount. In a real estate market where homes aren’t selling quickly, the seller may require less for the earnest money deposit. But in a market where demand is high, the seller may ask for a higher deposit, perhaps as much as two or three percent. Remember that if you have a large EMD in your contract your mortgage lender may want you to verify the source of the funds for that deposit. It should not be a problem if you can show that you’ve had the money for at least 60 days.

 

When Do You Pay the Earnest Money, and Who Holds It?

 

In most cases, after your offer is accepted and you sign the purchase agreement, you give your earnest money deposit to the title company. In some instances the Real Estate Brokerage will hold the earnest money. After turning over the deposit, the funds are held in an escrow account until closing.

 

Catherine L. Gillman

Principal Partner

Ekko Title

www.ekkotitle.com

4545 Daisy Reid Avenue, Suite 100

Prince William, Virginia 22192

703-497-3556 office

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