One of the most confusing parts of a purchase transaction for many first-time buyers is the concept of earnest money. This good faith money is provided by the buyer to indicate that they intend to complete the purchase transaction provided they can obtain financing, have no unresolved issues with a home inspection, and the property has an appraisal value that equals or exceeds the offer price. In Florida, the earnest money is usually deposited into the title company’s escrow account.
If the sale closes, the earnest money that has already been collected will be credited toward the buyer’s closing costs, thereby lowering their total amount due. On the other hand, if the buyer walks away from the deal or the seller feels the buyer didn’t try hard enough to get a loan, things can get complicated.
The title company isn’t legally empowered to decide who receives the earnest money if the sale doesn’t close. That’s an issue for the buyer and seller to settle through negotiation, mediation, arbitration, or the courts.
Earnest money can be anywhere from 1% – 10% of the offer price. For Broward County purchases, 3% is a reasonable amount, but the seller has the right to request more. If the seller receives multiple offers, a larger earnest money deposit may tip the scales in your favor.