Earnest Money

Sam · Posted: Thu Apr 01, 2004 10:53 pm Post subject: Earnest Money

Earnest Money is a portion of down payment paid to a seller or an escrow agent by a buyer of real estate. It is paid prior to closing to make a formal offer to demonstrate that he/she is serious. It is deducted from the purchase price at closing and it is not an additional cost. It is also known as a deposit.

For example, the value of a property is suppose $400,000. Smith is interested in purchasing that property. So, he gave $100,000 in cash to the seller prior to closing to demonstrate that he is serious. Here, $100,000 is known as 'earnest money'.

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