When we’re talking about earnest money in a contract to purchase a home, we’re talking about a specific amount of money that is contributed by the buyer as part of their offer. This “good faith” money is set aside and applied to the purchase price at closing. Every transaction is different but a good rule of thumb when writing an offer is 1% of the purchase price. For example, let’s say you’re working with your buyer agent and you submit an offer to the seller for $300,000, your EMD check would be $3000. In Maine, there’s a paragraph in the Purchase and Sale agreement that specifies how much and when you’ll submit the earnest money or EMD payment. If you’re in a competing offer situation you’ll want to submit the check, or an image of the check with the offer and you’ll want the check to be a little higher than the 1% guideline. If you’re not in a competing offer situation you can hedge a little and write within the offer that you’ll submit the EMD within a day or two.
In Maine, the EMD or earnest money is held in a specific account called a Real Estate Trust account, often with the seller’s agency. All real estate brokerages in Maine are required to have this type of account and its only function is to hold EMD funds while a home us under contract. There are a couple of things to understand about this EMD or Earnest Money Deposit.
When the buyer writes the check to the brokerage it will be deposited and held in the company’s Real Estate Trust account. Though there are some exceptions if the contract period goes poorly, this money is usually only released from this account if 1. The contract is canceled prior to the end of the Due Diligence period or; 2. When the contract closes.