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What is Earnest Money?

Earnest money is an amount that is paid towards the house at the time of contract by the buyer to show their earnest intentions and interest in purchasing the property. The reason is two-fold. First, in Oklahoma it is required to have some form of consideration, in this case money, accompanying a contract in order for the contract to be legally binding. Second, a contract to purchase a house is also a contract not to sell the house to anyone else. In this instance, the earnest money is protecting the seller from malicious buyers who might otherwise flippantly place contracts on houses and unduly place financial burden on the sellers.

How much earnest money is normal? It depends. The greater the asking price of the house, usually the greater the earnest money, however, it is always an item that is up to negotiations in the offer process. For a $100,000 home, it wouldn't be uncommon to see between $500 and $1000 or more asked for as earnest money. For a cash purchase or where there is a significant down payment the earnest money might be considerably higher. This money is held in a trust account until either the contract is cancelled or the transaction closes.  

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