How to Fill Out an Earnest Money Check

An earnest money deposit demonstrates a buyer’s serious intent to purchase a home, acting as a good faith gesture to the seller. It assures the seller their property will be off the market while the buyer completes due diligence, such as inspections and appraisals. This financial commitment is held by a neutral third party and typically becomes part of the buyer’s down payment or closing costs if the sale successfully concludes.

Essential Information Before Writing

Before writing an earnest money check, homebuyers must gather specific details to ensure accuracy and avoid complications. Determining the correct payee is a primary step, as the check should never be made out directly to the seller. Instead, the payee is typically a reputable third party, such as an escrow company, a title company, a real estate brokerage’s trust account, or a legal firm, as outlined in the purchase agreement. It is important to verify the exact legal name of this entity to prevent delays.

Confirming the precise earnest money amount is another detail. This sum is usually specified in the purchase agreement and often ranges from 1% to 3% of the home’s purchase price, though it can be negotiated. The funds for this deposit should originate from a verifiable source, typically the buyer’s own bank account, which lenders often require documentation of.

Identifying the property details is necessary for proper record-keeping. Including the property address or a clear identifier on the check’s memo line helps link the payment directly to the specific real estate transaction.

Step-by-Step Check Completion

Once all necessary information has been gathered, accurately filling out the earnest money check is a straightforward process. Begin by writing the current date in the designated date field, typically located in the top right corner of the check. Following this, accurately write the full legal name of the designated payee on the “Pay to the Order of” line. This name must precisely match the escrow company, title company, or brokerage trust account identified in the purchase agreement.

Next, enter the precise earnest money amount in numerical figures within the dollar box. Below the numerical amount, write out the exact same amount in words on the long line provided, ensuring it matches the numerical entry. For example, if the amount is $5,000.00, write “Five Thousand and 00/100 Dollars,” and draw a line through any remaining blank space to prevent alteration.

In the memo line, located in the bottom left corner, include identifying information relevant to the transaction. It is advisable to write “Earnest Money for [Property Address]” to clearly associate the payment with the specific property being purchased. This detail aids in tracking and provides a clear record for all parties involved. Finally, sign the check on the signature line in the bottom right corner, using the signature that matches the account holder’s official records.

Delivering and Tracking Your Earnest Money

After completing the earnest money check, its proper delivery and subsequent tracking are essential steps. Common methods for submitting the check include handing it directly to your real estate agent, who will then deliver it to the designated escrow or title company, or delivering it yourself to the escrow agent’s office. It is generally advised to avoid sending cash for earnest money due to traceability and security concerns.

Upon delivery, obtaining a receipt or written confirmation of the earnest money deposit is important. This documentation serves as proof of payment and should be kept with other important transaction records, along with a copy of the check itself and relevant bank statements. The earnest money is then typically held in a neutral escrow or trust account by the third-party agent until the real estate transaction closes.

Buyers can track the status of their earnest money to verify its deposit into the correct account. The fate of the earnest money is directly tied to the contingencies outlined in the purchase agreement, such as successful home inspection or financing approval. If these conditions are met, the earnest money is applied towards the buyer’s down payment or closing costs; however, if the deal falls through due to a reason not protected by a contingency, the buyer may risk forfeiting the deposit.