Earnest Money

Earnest Money

Earnest Money is a deposit made by a buyer to demonstrate their serious intention to purchase a property. This monetary commitment is typically held in Escrow and serves as a form of security for the seller, assuring them that the buyer is genuinely interested in completing the transaction.

Should the transaction proceed successfully, the earnest Money is usually applied toward the down payment or closing costs. However, if the buyer backs out of the deal without a valid reason, they may forfeit the earnest Money to the seller.

Examples:

  • In a residential real estate transaction, a buyer offers $5,000 as earnest Money when making an offer on a $300,000 home. If the sale closes, this amount goes toward the purchase price.
  • If the buyer decides to withdraw their offer due to inspection issues, they might recover their earnest Money, provided the contract includes an inspection contingency.

Cases:

  • In a competitive housing market, a buyer may offer a larger earnest Money deposit to make their offer more attractive to the seller.
  • If a buyer fails to secure financing and backs out, they typically lose their earnest Money unless the contract stipulates otherwise.