Earnest Money
Quick Answer
A good-faith deposit showing serious intent to purchase a property.
Definition
A good-faith deposit showing serious intent to purchase a property.
Explanation
Earnest money (1-3% of purchase price) is deposited into escrow when making an offer. At closing, it's credited toward the down payment. Contingencies (inspection, financing, appraisal) protect your deposit if you need to cancel.
If you back out without a valid contingency, the earnest money may be forfeited to the seller.
Example
$400,000 offer with 2% earnest money = $8,000 in escrow. If inspection reveals major issues and you cancel per contingency, you get it back.
Frequently Asked Questions
What is Earnest Money?
A good-faith deposit showing serious intent to purchase a property.
How does Earnest Money work?
Earnest money (1-3% of purchase price) is deposited into escrow when making an offer. At closing, it's credited toward the down payment. Contingencies (inspection, financing, appraisal) protect your deposit if you need to cancel.If you back out without a valid contingency, the earnest money may be forfeited to the seller.
Can you give an example of Earnest Money?
$400,000 offer with 2% earnest money = $8,000 in escrow. If inspection reveals major issues and you cancel per contingency, you get it back.
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