You found the perfect home and are ready to make an offer, then the REALTOR® asks you for earnest money that will be submitted with the offer.  Many people are hesitant to offer a large amount of earnest money for the fear they will lose it for some reason.  However, what they don't realize is, the more earnest money offered, the stronger the offer will look to the seller.  But once again the fear of writing that check creeps back in!  


If you are working with a reputable REALTOR® that is experienced, you shouldn't have to worry about losing your earnest money.  Purchase and sale agreements for real estate are written to protect the buyer.  There are appraisal contingencies, inspection contingencies and financing contingencies that protect the buyer's earnest money.  Earnest money cannot be released to a seller or buyer without BOTH PARTIES AGREEING AND SIGNING AN EARNEST MONEY RELEASE FORM.  Earnest money can then be released to the appropiate party.  Also, 100% of the earnest money is released.  The real estate company or agent DOES NOT KEEP any part of the earnest money.  If an agent tells you their company keeps part of the earnest money, FIND ANOTHER AGENT!  This is very unethical and most likely illegal.  


If neither buyer or seller can agree on how to release the earnest money, then it goes to interpleader.  Let's just say that after this step, there won't be much if any earnest money left for either party, especially if only $500 was offered.  So it's best to work out the differences if any and move on.  


I like to explain to most buyers about the only way to lose your earnest money, is the "cold feet" syndrone.  This means the buyer receives an accepted offer from a seller and then the buyer gets nervous and wants to back out.  Sellers don't appreciate this and will more than likely go after the earnest money.  However there are situations when the agent or finance company makes a major mistake on the buyer's behalf and causes a dispute with the seller.  An educated and experienced REALTOR® should not make these types of mistakes!  That's why it's important to ask for several referrals and do your homework thoroughly before choosing your REALTOR® and also choose your finance company wisely.  You always want to work with someone you can sit down with face to face and ask questions and someone who has experience and a good reputation in their profession.