Earnest Money
Author: Terri Ewing | Date: September 4, 2008 | Filed In: Glossary
Earnest Money Defined
Earnest money is money given to the seller from the buyer to show genuine interest in buying their property. The earnest money is not given directly to the seller but put in an account with a third party like a title company or an account with the real estate broker. When you put in an offer, you write the earnest money check.
If your offer is accepted, the earnest money is placed in the third party account and is credited toward your down payment when the home closes. Underwriters always need to check where the money came from for your down payment so they do the same for the earnest money. They have to see that is cleared your bank or that you had the funds necessary for it to clear.
If you back out of the contract, the seller can keep your earnest money. Of course, there are legitimate reasons a contract is cancelled like the home not appraising for the purchase price or your loan being denied. But those have to be done within the time frames on the contract.
Author: Terri Ewing
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