What is an Earnest Money Deposit? When is it due?
What is an Earnest Money Deposit (EMD)?
Some people call the Earnest Money Deposit a Good Faith Deposit. It's the initial money that you put into escrow when you have an agreement to purchase a property. It's to show the sellers of the property that you are serious and you're willing to put your money where your mouth is.
If something goes wrong during the transaction process and the buyer breaches the contract, the sellers then have the option to try and recover some or all of the Earnest Money Deposit in damages.
When buying a home, the Earnest Money Deposit is protected by three contingencies: inspection contingency, loan contingency, and appraisal contingency.
The earnest money deposit is typically wired in within three days of opening escrow so that's the money that you should have on hand when you're actually looking at properties and submitting offers. It's generally three percent of the purchase price here in southern California.