Earnest money
The deposit a buyer puts down with an offer to show they're serious. It's held by a neutral third party, usually the title company. If the deal closes, it counts toward the buyer's costs. If it falls apart, who keeps it depends on why.
Your Room opens on this part of the sale, with the offer and everything before it already ticked.
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See how it worksWhere this comes up in a sale, and what follows
- Review offers and negotiate (comes before)
Part 1 of 4
Why a seller cares
It is the buyer's deposit, and whether you keep it if they walk depends entirely on the contract's contingencies. Sellers often assume it is theirs the moment a buyer leaves; usually it is not.
Part 2 of 4
A simple example
A buyer offers $300,000 on your home and puts down $6,000 in earnest money, about 2% of the price, which is typical. The title company holds it. Where it ends up depends on how the deal ends.
| How the deal ends | Where the $6,000 goes |
|---|---|
| It closes | Credited to the buyer at closing, against what they owe |
| They cancel in time | Refunded to the buyer, if they cancelled inside a contingency they still had: inspection, appraisal, financing |
| They just walk | May be forfeited to you, for a reason the contract does not allow |
Three outcomes, one deposit. Which one you get is written into the contract before the buyer ever cancels.
Part 3 of 4
What people get wrong
That it is a penalty. It is a deposit with rules, and the rules are the contingencies you already agreed to.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · read against CFPB: what is earnest money? · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines earnest money in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
Organize my saleFree to set up. Pay once when you list: $89 or $189. 7-day refund.