Tracking Your Purchase Expense & Earnest Money Deposit in the Expense Tracker
Learn how to track your Purchase Expense and Earnest Money Deposit in the Expense Tracker.
One question that is asked quite often is how to track your Purchase Expenses and Earnest Money Deposit be tracked and recorded in the Expense Tracker?
So, the Earnest Money Deposit is a deposit usually of $500 to a few thousand dollars that the buyer gives to the seller upfront when they make an offer and basically states the buyer intends to buy the property pending inspections, and if the buyer fails to purchase the property they may have to forfeit the deposit.
So when the buyer gives the selller an earnest money deposit these funds are typically held in an escrow account until closing, at which point the earnest money deposit is then applied to the buyer's purchase amount.
So for example, if the buyer agreed to buy a property for $100,000, and put down a $1,000 earnest money deposit, the buyer would owe the remaining $99,000 at closing.
So let's input this into the Expense Tracker as example.
Let's first put the $1,000 Earnest Money Deposit in the Expense Tracker. We are going to write the description of Earnest Money Depost, seelect the Bank Account that the check was written out of, select the Vendor who the check was made to which will likely be the Seller.
The final selection we need to make is the Category...so because the EMD is credited toward the purchase of the property I'm going to select Purchase Price.
And then the last thing we need to enter is the amount, which was $1,000.
So now that we have entered the Earnest Money Deposit, we need to enter the remaining balance of the purchase price.
We will start by adding a new Expense and entering a description of the Expense, so let's put Remaining Purchase Balance
Next we will again need enter the Bank Account that was used to pay the Expense, the Vendor that was paid for the purchase & then select Purchase Price as our Category.
For the amount, we will enter the remaining purchase balance of $99,000.
In the Expense Tracker you can see we have our initial EMD of $1,000 that was paid to the Seller when we initially made our offer, and then a second payment of $99,000 which was the remaining balance paid at closing for a total of $100,000 in purchase expenses.