How much earnest money should I ask for?

Earnest money is a buyer's deposit of money upon signing a contract, and it signifies their good faith intention to follow through with the purchase. In the event that they default on their contractual obligations, the contract might entitle the seller to all or some of the earnest money to cover their damages.

If the earnest money deposit is not enough to cover the seller's damages, the seller's only recourse might be to sue for additional money. This process can be expensive, and it might even cost more than the damages themselves.

Therefore, the amount of earnest money should be enough to cover a seller's potential costs if the buyer were to breach the contract. Some factors to consider might be the seller's actual cost of ownership of the property until it can be sold to someone else, re-marketing expenses if the property has to be sold to someone else, and moving expenses. Whether a seller will be entitled to the money might not be guaranteed, the earnest money deposit will serve as security for the potential risk.

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For advice on legal matters please contact your attorney. This information was prepared in collaboration with Kahn & Kahn Attorneys at Law.