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An earnest money deposit, often just called earnest money, is an amount of cash that a potential buyer agrees to pay soon after their offer on a home is accepted. It’s provided as a sign of “good faith” that the homebuyer plans to follow through with the home’s purchase. It’s often paid by check (personal, cashier’s, or certified) or an electronic transfer (wire transfer), and held by a third party for the escrow period until closing.
Once the deal goes to closing, the earnest money is typically applied toward the home’s down payment or the buyer’s closing costs. A buyer’s earnest money deposit may be forfeited if they break the contract without a valid, permissible reason.
Further reading
See also contingency
See also escrow period
