Builder Deposit vs Earnest Money – What's the Difference to Home Buyer?

Ask Cary Real Estate: What’s the difference between a Builders Deposit and Earnest Money? How do they effect the Home Buyer? Cary home buyers offer earnest money on a re-sale home and a builders deposit on most new construction. Here’s a quick overview of the similarities and differences between a builders deposit and earnest money.

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Builder Deposit Defined: Money paid upfront at time of contract directly from prosepctive buyer to the builder.  Builder deposits into business operating account.   Builder credits buyer the amount of the deposit at closing.

Why?: Builder is building a home specifically for one buyer – making changes, ‘customizing’ the home based on that buyers wishes – the builder wants a level of protection should the buyer not actually purchase the home – to avoid being left with a home that might not appeal to the average buyer.

Usually Non-Refundable if the buyer walks from the contract - the offer to purchase should specifiy

How much? sometimes calculated as 5%-10% of the base price of home – sometimes 50% of any ‘add-ons’ buyer chooses.

The amount of builder deposit and how it’s calculated varies with different builders and different stages of construction when the buyer purchases.  It’s a negotiable amount but that doesn’t mean both parties can come to terms.

earnest money builder deposit check

Earnest Money Defined: Money paid upfront by buyer at time of contract.  Money is payable to a trust account – most commonly the listing real estate firm or a local real estate attorney’s trust account.  Money is credited to buyer at time of closing.  If property doesn’t close earnest money may or may not be returned to buyer – depending on circumstances.

Why? It’s a show of good faith from buyer and financially invests them in the purchase – the money can be  at risk if buyer does not close.

If Disputed – Can’t be released by trust agent unless both parties agree who is entitled or by court order.

Earnest Money Amount: Cary home buyers usually pay 1% of the purchase price but this is negotiable.
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Thanks for Reading our Cary Real Estate Blog. Post Authored By: David Williams

David’s a Licensed North Carolina Realtor & The Voice of CaryRealEstate.com