What is earnest money?
When sellers receive an offer on their home, they want to know the buyer is serious. To demonstrate the genuineness of their offer, buyers provide earnest money.
This check (or cash) typically equals one or two percent of the purchase price. It is given to the sellers with the offer. If the offer is accepted, this “deposit” helps reserve the home for the buyer.
These funds are deposited into an escrow account until closing when they are applied to the purchase of the home. If the deal does not go through, the seller returns the earnest money to the buyer. However, if the buyer backs out of agreed-upon terms, the money may not be returned.
Buyers can work with their real estate agent to protect their earnest money by writing certain contingencies into the contract.