Definition
Earnest money is a deposit a buyer puts down after an offer is accepted to demonstrate good-faith intent to complete the purchase. It is typically held in an escrow or trust account by a neutral third party until closing.
At closing the earnest money is usually applied to the buyer's down payment or closing costs. If the buyer breaches the contract, the deposit may be forfeited; if the buyer cancels under a valid contingency, it is generally refundable.
Why it matters
Earnest money deadlines, when the deposit is due and to whom, are early, contract-critical milestones. Missing the deposit deadline can put the contract at risk before any other work begins.
Tracking the earnest money deadline alongside the rest of the transaction's milestones keeps an easy-to-forget but high-stakes step from slipping.
Related terms
- EscrowA neutral third-party arrangement that holds funds and documents until the conditions of a transaction are met.
- ContingencyA condition in a purchase contract that must be met for the transaction to proceed, such as financing, inspection, or appraisal.
- Closing DisclosureA standardized five-page form detailing the final terms and costs of a mortgage loan, delivered before closing.
Realm tracks earnest money and every other milestone on the transaction so contract-critical deadlines do not slip.