| When you start the process of buying a
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| | Estate Agent and balance the need to
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| home or any type of real estate, you'll
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| | demonstrate your serious intent, against
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| no doubt hear the term "earnest money
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| | the good business practice of minimizing
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| deposit" (EMD). So what exactly is an
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| | the deposit amount.
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| EMD?
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| | The amount of the EMD is usually applied
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| An EMD becomes relevant when you are
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| | to reduce the purchase price of the
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| ready to make an offer on a property. In
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| | property or to cover closing costs, as
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| most states, your Real Estate Agent
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| | you dictate. For example, if you are
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| prepares the offer on your behalf. The
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| | purchasing a $300,000 property and you
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| offer usually takes the form of a written
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| | give an EMD of $3000, then the remaining
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| contract that is submitted to the seller
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| | balance owned at closing is $297,000
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| by way of their agent.
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| | (plus closing costs). Alternatively, you
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| In addition to the offer document,
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| | may direct that the EMD be applied toward
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| sellers typically expect an EMD. An EMD
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| | the closing costs.
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| is a monetary deposit submitted via check
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| | Once a valid contract for purchase is
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| to demonstrate to the seller that you are
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| | created, an independent third-party
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| a serious buyer. In some regions of the
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| | usually holds the EMD until the purchase
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| country, only a photocopy of the check is
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| | is either completed or cancelled. At this
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| submitted with the offer, and the
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| | point, the money belongs jointly to both
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| original check is delivered to the
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| | the seller and the buyer.
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| appropriate entity if the offer is
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| | In cases where you make an offer that is
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| accepted. Ask your Real Estate Agent to
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| | accepted but later decide to cancel the
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| clarify how deposits are handled in your
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| | offer, the terms specified in the
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| region of the country.
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| | contract (or state law) will dictate if,
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| The check is usually made out to an
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| | and under what circumstances, the EMD is
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| independent third- party such as a Title
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| | returned to you. Be aware that you could
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| Company, Escrow Company, Real Estate
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| | loose your deposit if you do not not
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| Attorney or your Real Estate Broker. Ask
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| | comply with the terms of your contract.
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| your Real Estate Agent to clarify who
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| | Your Real Estate Agent can provide you
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| will hold the EMD.
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| | information about how EMDs are dealt with
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| The amount of the EMD sellers expect
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| | if a contract is cancelled.
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| varies by region. The EMD amount is based
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| | Since state law varies by region and
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| on the customs and practices for a
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| | practices can differ even within the same
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| region, but is generally from 1% to 2% of
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| | state, be sure to consult your Real
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| the purchase price. In a competitive
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| | Estate agent about the rules that apply
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| market place where demand exceeds the
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| | to EMDs in your region of the country.
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| supply of homes, some buyers may offer a
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| | You should also be aware that the EMD is
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| higher EMD than expected to impress the
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| | not related to any down payment that you
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| seller of their intent. In determining
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| | make toward your home loan.
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| the amount of your EMD, consult your Real
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