Earnest money is one of the most misunderstood parts of a real estate transaction — yet it's critical to getting deals to closing. Whether you're a new agent or a seasoned pro, understanding how earnest money works can save your deals from costly mistakes.
Earnest money is a deposit made by the buyer to show they're serious about purchasing the property. It's typically held in escrow by the title company or brokerage and applied toward the buyer's down payment or closing costs at closing. The amount varies by market but is commonly 1-2% of the purchase price.
Tracking earnest money delivery and verification is a process that can easily slip through the cracks. If the deposit isn't delivered within the contract deadline, the entire deal can be at risk. As an agent, staying on top of this deadline protects your buyer's position and maintains trust with the seller.
The best way to avoid earnest money issues is to have a system. Add the deposit deadline to your calendar immediately after contract acceptance, confirm receipt with the title company, and verify funds are wired or deposited in time. Working with a transaction coordinator who manages these details ensures nothing slips through the cracks.
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Smooth Closing Solutions tracks earnest money verification and every other deadline so you can focus on your clients.
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