What Is Earnest Money and How Does It Work?

Earnest money is a deposit made by a buyer after an offer is accepted to show they are serious about purchasing the home.

The earnest money deposit is typically held by a title company or brokerage during the transaction.

In most cases, the money:

• Applies toward the buyer’s closing costs or down payment
• Is protected by contract contingencies
• May be refundable under certain situations

Common contingencies include:

• Financing contingency
• Home inspection contingency
• Appraisal contingency

Earnest money amounts can vary depending on the price of the property and local market conditions.

In competitive markets, stronger earnest money deposits may help make an offer more attractive to sellers.

Author Bio: James Goudreau, Realtor® | Coldwell Banker Realty – Kankakee County Hands-on local expertise with a modern marketing approach.