Maybe it's because of my job, maybe it's because of my upbringing, maybe it's because of my heritage, but anything or anyone described as "earnest" immediately arouses my suspicion. So when the topic of "earnest money" came up last week, I was not favorably inclined.
is basically cash that you give to your real estate agent to show sellers how serious
excuse me, how "earnest"
you are about buying their house. Your agent then hangs on to it until the deal either closes or falls through. If it closes, it's put toward your purchase. If it falls through, you get it back. Theoretically.
, but if the deal falls through for reasons not spelled out in your contract, the seller can keep your money even though you don't get the house.
There are other ways to show earnestness (the amount of your offer, the size of your down payment, a heartfelt note hand-delivered to the sellers). But, in homebuying as with wedding gifts, people generally like money. So the question, essentially, is this: How earnest a buyer are you?
, I can tell you exactly: We were prepared to be 1 percent earnest. With an asking price of $638,000, this is not an insubstantial amount of earnestness. Besides, as far as I can tell
in real estate as in life!
of earnestness. Sometimes earnest money is a percentage of the asking price; sometimes it's just a few hundred or thousand bucks.
But our Realtor was aghast. Our offer wouldn't be taken seriously, she said. But what about our offering price, I asked. What about our proposed down payment? What about this contract we are prepared to sign? What about this essay Michael wrote in high school about the dignity of work as portrayed in the songs of Bruce Springsteen, which he is prepared to fax to the sellers?
The one thing we were not prepared to do was to be 4 percent more earnest, which is what our Realtor suggested. Maybe we were wrong. And I understand that the seller wants assurance that the buyer is serious and will see the transaction through. But this argument seems to ignore the presence of a contract. If you sign an offer, which protects and obligates both parties, then what's the purpose of "earnest money"?
I'll tell you: It has no purpose. Sellers, with the encouragement of Realtors, extract it simply because they can. And because they have been working this way for decades, maybe even centuries. I wonder how much earnest money Abe Lincoln had to pay to get
All this said, I concede that this position is not entirely rational. After all, if we really want the house, and if all the conditions we spell out in the contract are met, what does it matter? We can just subtract the earnest money we pay now from the down payment we plan to make later. What's a few thousand (or tens of thousands) bucks among friends (or parties to a contract)?
Well, I'm not there yet. I may have to be irrational about this for a while. Earnestly irrational.