Realestate-ese – EMD (Earnest Money Deposit)

EMD, or EARNEST MONEY DEPOSIT, is an important part of the offer process. You will often hear this called simply a DEPOSIT or EARNEST MONEY but you will see EMD in MLS listings or instructions from escrow. The California Residential Purchase Agreement (offer) refers to it as INITIAL DEPOSIT.

As a buyer when you submit anĀ  offer you are expect to also submit an EMD (earnest money deposit). This is handled is different ways depending on what state you are in. Here is California you are expected to submit the actual deposit itself once you have a signed contract and have opened escrow. You can submit an actual check to escrow (delivered in person or via mail) but more commonly people are wiring the funds directly to escrow, especially since it is usually thousands of dollars.

The amount of the deposit can vary widely, although 1 – 3% of the offer price is fairly common. It also may be an item that becomes part of the negotiations if, say, you say the deposit will be $2500 on a $500,000 offer but the seller wants it to be $5000 or more.

The EMD is a good indicator to the seller of your seriousness as a buyer so be smart about it.

And if you missed the earlier Realestate-ese post, you can read it here – POF (Proof of Funds)