What is an Earnest Money Deposit?

An Earnest Money Deposit is a good-faith sum paid by a prospective buyer or investor to affirm commitment to completing a transaction. It demonstrates intent, indicating they won’t casually withdraw from negotiations. Should the buyer default for non-compliant reasons, this deposit may be forfeited, compensating the other party’s lost opportunities.

Key Points

• Negotiation Tool: Strong earnest money can convince a seller of serious interest.
• Refund Conditions: If predetermined contingencies fail, deposits often revert to the payer.
• Market Norms: Sum percentages vary depending on asset type or regional practices.
• Protected Handling: Funds typically sit in escrow until finalizing the deal.

By putting monetary stakes upfront, buyers show trustworthiness, building confidence that discussions will culminate in a finalized contract rather than abrupt withdrawal.