Your executed/binding Purchase and Sales Agreement, specifies the amount, where to deliver, and the time limit you have to deliver your Earnest Money Deposit to the designated holder of those funds.

You'll want to avoid accidentally falling in breach of contract, Therefore it is VERY IMPORTANT that you deliver those funds within the time limit that is specified on your binding contract.


Earnest Money Deposit or "Good Faith funds" is the amount of money you are willing to loose should you not fulfill your end of the contract. But when you do fulfill your end of the contract and reach the closing table, then your Earnest Money Deposit will be credited to you as money you've already paid towards your cash needed to close on your new home.

What can impact your Earnest Money?

When your agent helps you to prepare an offer to purchase a home, he or she has to specify on the offer how many days you wish for due diligence (aka inspection period or buyer's remorse period), how much time you need for your financing contingency (aka the amount of time your loan officer needs to get a conditional approval of your loan from the mortgage company), and how much time you need for your appraisal contingency (aka the amount of time to find out if the house you are buying has appraised for as much as you have it under contract). These three (3) factors are very important in protecting your Earnest Money Deposit so that it can be applied to your "cash to close" on your new house.

Requesting days for a due diligence period is optional. Should you request a due diligence period and the seller accepts to grant you that period, it will be important for you as the buyer to complete the negotiation of any repairs or credits in lieu of repairs, prior to the expiration of this time period. If you are in a situation where you do not come to a mutual agreement with the seller on repairs or credits, you are at liberty to terminate your purchase agreement within your agreed upon due diligence period, without the fear of loosing your Earnest Money Deposit. If you do not terminate before the expiration of that Due Diligence period, it means that you are accepting to purchase the property as is.

Requesting a financing contingency period is also optional. When it is requested, it gives your lender that specific number of days from the time you go under contract, to submit your documents to underwriting and get it back, hopefully with your conditional loan approval. If a borrower's loan were to get declined (within the financing contingency period) and due no fault of the borrower (such as loss of employment, cut in pay, etc.), the borrower may terminate the contract, providing the declination notification from the mortgage company, and it is likely that the borrower could retain the Earnest Money Deposit. If the borrower's loan gets declined due to a fault of the borrower (such as obtaining new debt which causes the loan to get declined), then the borrower is likely to loose the Earnest Money Deposit. IMPORTANT: Make sure that while you're in the process of buying your next home, you DO NOT enter into ANY new debt.

Requesting an Appraisal Contingency period is optional as well. When it is requested, that is the amount of days the buyer requests from the seller to allow for the appraisal to take place and to find out if the house actually appraised for as much as you have it under contract. If the appraisal were to reflect a lesser value than what both parties have agreed upon (in the contract), then the Buyer has the right to try to renegotiate the price of the property being purchased. In some cases, Buyers may offer (at the time of submitting an offer) to pay a specific amount above the appraisal value. If the buyer did not offer to pay anything above appraisal value and should the parties not reach an agreement on a reduced price, then the Buyer may terminate within the Appraisal Contingency period, without fear of loosing his/her Earnest Money Deposit.