Hello, I’m Marcie Billen with Ruya Team Realty and Keller Williams Mulinix here inNorman, Oklahoma and today I’m going to answer the question, is earnest money refundable? I want to answer this question from both a buyer’s perspective and the seller’sperspective, but if you’re thinking about purchasing a house, you may want to watch this video next. If you’re thinking about selling your house, you may want to start by watching these videos.
What is Earnest Money?
What is earnest money? Earnest money is anamount of money that’s actually written into the Oklahoma sales contract and it’s deposited into a trust account. It’s not just a check that the title company or your real estate agent holds for you, but they actually put it into an account and honestly, I like to think of it kind of like blood money. Like you’re saying “hey, I’m really serious about this house so I want to buy it, and here’s my thousand dollars, or five hundred dollars, or two thousand dollars, depending on the purchase price, to show you, the seller, that I’m really serious about purchasing this house.”
What Happens to My Earnest Money Deposit?
What happens to this earnest money? Does it just disappear at the closing table? Does the seller get to keep it? No, no, no. Actually, all that earnest money does is go directly into your down payment. Does theseller get to keep it? Well kind of, yeah, because you’re paying them for the house, but it’s gonna go toward your down payment, as the buyer.
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How Much Earnest Money Do I Need?
How much earnest money do you actually need? Here in Oklahoma, we don’t have a hard, set amount. What I do, as a real estate agent, generally I recommend that my clients do around 1%. If it’s more or a little less, that’s okay. As an example, if you’re buying a $100,000 house, I’m totally okay with you putting $500 as earnest money, as long as the seller’s okay with that. And then if you’re buying a $300,000 house we’ll probably say two thousand or twenty five hundred dollars for your earnest money.
Is Earnest Money Refundable?
Yeah! For a buyer, absolutely. I’ve never actually had the experience, in my career, where the seller gets to keep the earnest money from the buyer. And I have another video on this too, about breaking the contract. You can watch it here. So for instance, as a buyer, if you back out of the real estate contract when in home inspections, you would typically get your money back. Now, both buyer and seller have to agree to this.
Another thing that people don’t realize it is, let’s say the day before closing something happens like your boss fires you, right? The bank calls your boss or your HR department the day before closing to make sure that you have a job and if they say “no, I’m sorry, they don’t work here anymore,” then you’re gonna be denied for your home loan, typically. If that happens then technically, as per the Oklahoma real estate contract, you would receive a refund for your earnest money because you were denied a loan and you can’t buy the house. However, both buyer and seller still have to agree.
Can Sellers Keep the Earnest Money?
Okay sellers, this earnest money was never really yours unless that purchase contract actually goes through. This is money that the buyer submits to show that they’re very serious about the house. And you want them to be serious about that, right? I commonly get asked by sellers “well, if the buyer backs out of the contract do I get to keep the earnest money?” Typically, no.
Why? The biggest reason is that you have a house and they don’t. If the buyer kept to the timelines, and they did their inspection everything happened and then you know, right before closing, they get denied for a loan, technically they still get their earnest money back in full. Generally, the only way a seller would get to keep that earnest money is if the buyer just changes their mind right before closing or after the inspection period and they don’t have a denial letter from their lender. In that situation, I’ve heard about it from other Realtors, the buyer usually feels bad for keeping your house off the market for a month or however long, and they are more likely to give up that earnest money. But that all depends on the emotions of the situation.
Was this answer helpful? If you have more questions, feel free to reach out – I am happy to help!
Marcie Billen | [email protected] | 918.691.8982
