What is earnest money for?

Try this website.

http://homebuying.about.com/od/buyingahome/qt/earnestmoney.htm

Earnest money is used for two reasons:

1. To show how serious you are in the property
2. To make the contract legal.

Ok then I got another question about earnest money:

Who do you give the earnest money to, the tittle company or the seller directly?

Earnest money goes to the title company (after a contract is agreed upon by both parties). It goes into an escrow account, and is applied to the transaction as instructed on the contract or attached paperwork.

Hello Wrecklesskane,

I'm a newbie here but to answer your question:

Earnest money is the deposit money that you place into an escrow account when you are purchasing a property as required in accordance with your state and the contract in which all parties sign. For example, an earnest money agreement between the buyer and the seller of the property may state that the buyer is required to place $100, as a down payment when the contract is signed and then another 5% of the purchase price within 1 week of signing the contract. All of the earnest money deposits that are made during the real estate transaction are applied to the down payment and/or the closing costs. The earnest money deposits are not extra costs to the buyer but rather upfront payment of costs. The initial earnest money deposit is also known as a good faith deposit because it shows "good faith" that the buyer intends to go through with the transaction.

When writing up this contract, make sure there is a clause for refund of the earnest money paid in case the buyer is unable to full fill his/her end the deal. Best way to avoid this is to make sure your finances are in line. Always use an attorney if you have doubts. A real-estate agent is not an attorney and may not be on the up and up with regards to contract law.

Good question and good luck in your future endeavors!

Ok great, I'm starting to get a good understanding about earnest money now. Thanks to you guys

Got a few more questions:

Do you give the earnest money to the tittle company at closing of the deal? Or straight upfront before closing?

And do you have to give the earnest money as a check or money order?

Give the money, in whatever form, to the escrow company (title company) as soon as you have a signed contract. Get a recept for the money, and make sure the other party also gets a copy of the recept. Normally the escrow agent will see that all parties get a copy of the recept. Both parties in the transaction, need to have copies of all forms and agreements, and escrow agent also needs a copy imediatly.