What is earnest money?

Earnest money is a good-faith deposit (often 1–2% of the price) held in escrow and credited to the buyer at closing.

Earnest money is a deposit a buyer submits with an offer to show serious intent to purchase. It commonly runs 1% to 2% of the purchase price, though the amount is negotiable. The funds are held by a neutral third party — typically a title company or escrow agent, not the seller — and are credited toward the buyer's down payment or closing costs at closing. If the deal falls through under a contract contingency such as inspection or financing, the buyer generally gets the deposit back; walking away for reasons the contract does not cover can forfeit it. The Consumer Financial Protection Bureau's home-buying resources cover how deposits are documented and disbursed.