Honolulu Home Buyers: Putting Up (and Getting Back) Earnest Money

Honolulu first-time home buyers often have many questions about the process and are usually unaware of how earnest money works.  Many wonder if the money they are putting down will return to them once they close of the sale. In most cases, this money will not go back to the home buyer.  Although there are some instances where it does go back into the buyer’s pocket.

Using Earnest Money

Anyone who has not gone through the process of a Honolulu home sale is not likely to know what earnest money is.  Earnest money is often considered the money put down in good faith. It is essentially a deposit made by a buyer that shows a Honolulu home seller that they are ready to close on a deal once their offer is accepted.

The money is needed within five days of a Honolulu homeowner accepting an offer. While the amount put into escrow will vary, it can be up to two percent of the offer price on the home.  This money does not go directly to the seller. Instead, it is placed into an account that is held by a third party.

This third party is in charge of keeping the money until closing.  Once this money is put into the escrow account the sale will continue.  

From here, the Honolulu home buyer will need to qualify for a loan, inspections or appraisals are scheduled and neither party is able to access this money until closing.

What Happens At Closing

A sale will only get to closing if everything goes well during the rest of the process.  The appraisal needs to come back with a value that satisfies the lender providing the mortgage.  Plus, the inspection should not have any major problems that would worry the buyer. If anything goes wrong the Honolulu  buyer should rely on contingencies to back out of the deal before getting to the closing table.

At closing, the third party will provide the escrow money from the account.  There are different options for what this escrow money will do if the home buyer has put down the money in different ways.  

Those that use cash to put money into escrow will see this money go towards the closing costs or even towards the down payment on the property.  Even though Honolulu buyers do not like to see this money go anywhere but in their pocket, it is good to invest in the down payment or the costs of closing.

There are times where there is no down payment that will be placed onto the loan.  With this type of loan, the earnest money may actually go back to the buyer because it does not need to be applied to the down payment or towards closing costs.  

Earnest “Money”

Not all Honolulu home buyers use cash to put earnest money into escrow.  There are times where a home buyer may use other items to put towards good faith instead of money.  Items like cars or other real estate properties can be used, so long as they have a significant value.

Getting earnest money back after closing is rare.  Most earnest money will be put towards closing costs or a down payment.  This can make it a little bit easier on the Honolulu buyer who does not need to dedicate as much money to these two payments.  In some instances, there are Honolulu home buyers who see some money come back to them if they do not need a down payment.