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Earnest money is an upfront deposit that will be held in an escrow account until closing or release of the purchase agreement. It shows the seller you are serious and ready to purchase their house. Earnest money will need to be in a form of a check and given to your agent within 1 day of an accepted offer. In Indiana typical amount of earnest money is 1% of the sales price. However, there is no rule or law that requires that amount. You can go as low or as high as you wish. Just keep in mind that the seller will be expecting the typical amount and anything lower should raise red flags.
using Earnest money to your advantage
You can use Earnest money to your advantage in hot markets. The most common way of doing so is making earnest money non-refundable. Meaning if you don't purchase the house the seller will keep the earnest money regardless of the reason for not buying the house. This is a risky negotiating tactic that should only be used in certain circumstances.
Will I get Earnest money back?
Earnest money will be held until closing and then credited towards your down payment or closing cost, but what happens if you don't buy the house? It really depends on the terms in your purchase agreement. Most common reason for not purchasing is financing failing. The bank wont loan on the property that you chose. If this happens and the offer is contingent of financing you will normally get your earnest money back. One thing to double check are the timelines specified in the purchase agreement. If the timelines have expired, and no extension was requested, you could be in breach of the contract (purchase agreement) and not be able to get your earnest money back. Talk to your agent about your specific terms and deadlines before submitting the offer. Make sure you have a good understating of what the purchase agreement contains.