Earnest Money Calculator

Calculate Earnest Money



Formula

The formula to calculate the earnest money is:

\[ \text{EM} = \frac{\text{HP} \times \text{E}}{100} \]

Where:

What is Earnest Money?

Earnest money is a monetary amount deposited prior to the sale of a home to represent a buyer’s good faith to move forward with the transaction. The average percentage a buyer is expected to pay is typically between 1 and 2% of the home price. This can reach higher levels of 5-10% in extremely hot markets, for example, what we are seeing in the year 2021.

Example Calculation

Consider an example where:

Using the formula to calculate the earnest money:

\[ \text{EM} = \frac{300,000 \times 2}{100} = 6,000 \]

This means that the earnest money for this example is $6,000.