In real estate transactions, an earnest money deposit is often made by the buyer to show the seller his good faith in a deal that they are engaging in. This type of deposit also gives the buyer more time when he is looking for financing. It is typically made jointly by the buyer and the seller in an escrow account or a trust held by a legal firm, broker, or a title company.
Now, if you are buying a property in the US, keep in mind that the amount that you have to pay to make this type of deposit varies from city to city, and usually, you have to pay it within 1 to 3 days after the seller accepts your offer. For instance, you will find some cities where the standard amount of earnest money deposit ranges from 1% to 3% of their properties’ sale prices. Aside from these, the amount of this type of deposit can also depend on the level of interest that you express towards a property, how quick you would close on your offer, and the activity of the real estate market.
You should also remember that it is possible that you will lose your earnest money deposit. So, you should understand how it is handled. Ask questions when making an offer and try to see the terms when making a contract.
This type of deposit is usually made with a certified or personal check or a wire transfer.