What the heck is an EMD?
No worries here, this is not an EMP. An EMD stands for Earnest Money Deposit. This is what we call it in beautiful state of Virginia. Some states may use different wordage to describe it, but it all means the same thing.
Whenever you decide to put an offer in on a house, you will need to put down an earnest money deposit. Think of this as similar to a down payment. If the offer is accepted the money will go towards the house or closing costs, so it’s not “extra” money you need to bring. However, it is money you need up front, because once the offer is accepted it will clear and the money will be out of your account. Some sellers may ask for a minimum earnest money deposit of $500 or $1000. I’ve wrote an offer with an earnest money deposit of $250. It all depends on the market, how competitive it is and what the seller is requesting. The EMD will go to the brokerage of your buyers agent, who will hold it in an escrow account. Once again, this is the process in Virginia, the definition is the same but the process of how they handle and receive an EMD may be different in your state.
The reason they require an earnest money deposit is to let the seller know how serious you are about buying the property. Usually, if you put down a high amount, you are letting the seller know that your are very serious about buying the property. It shows the seller that you have some skin in the game. Like I mentioned above though, if you don’t have a bunch of money to put as an EMD, it does not mean the deal will not work out. In the case I mentioned above, the sellers accepted our offer with a $250 EMD.
Now, your EMD is protected if certain things happen though. There are many ways you can get your EMD back, which your Realtor should explain to you during your 1–1 consultation. Here are two quick examples.
- If nobody can agree to repairs on the inspection report, you will get it back.
- If your financing falls through. Meaning the mortgage company can’t approve you anymore, then you will get it back. However, it is not instant. It could take a few weeks to get back into your account.
An EMD is something people don’t realize they need. No money down loan or not, you will need to provide an EMD when you send in your offer to the sellers. Let me say though, this is in Virginia. Some states could be different about the amounts and if you need it when sending the offer. The purpose of this short post was to say, be prepared to have more than just your down payment ready to go. You will need money up front, and this is one of the things it will be used for.