Knowledge Focus: Earnest Money
Earnest Money
Earnest Money (escrow deposit) is the specific monetary funds provided to bind an real estate sales agreement or some other transaction requiring a deposit. The deposit acts as evidence of good faith in purchasing real estate. The amount of earnest money varies based on the type of property being purchased and local market conditions, but is truly one mort part of the sales contract that must be agreed to by both parties. The seller or broker places the money in an escrow or trust account until closing, when it becomes part of the funds applied to the purchase price. Earnest money is forfeited by the buyer if they fail to carry out the terms of the contract agreement. In the event the property does not close, the sales agreement spells out the conditions under which buyer would forfeit the earnest money.
