What is an earnest money deposit?

An earnest money deposit is a type of payment made to secure a real estate transaction in South Dakota. The deposit is typically made at the time of the offer, and it is a way to demonstrate the buyer’s commitment to buying the property. The amount is usually anywhere between 1-5% of the purchase price, and is often held in an escrow account until closing. The money is used as a way to ensure the buyer has a “good faith” commitment for the purchase price, and it generally serves as a deterrent to any party that may try to walk away from the purchase. If the buyer breaches the agreement, the seller is entitled to keep the earnest money deposit. This ensures the seller is compensated for any incurred costs and time lost during the transaction. In South Dakota, the earnest money deposit must be held in an escrow account. This protects the money from any potential liens or claims made by creditors against either the buyer or seller. The escrow holder is also responsible for managing the funds according to the instructions of the buyer and seller, and releasing the deposit when the purchase agreement has been fulfilled.

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