Earnest Money

Definition: Earnest money is a buyer’s good-faith deposit under a purchase agreement, held and applied according to the contract’s terms.

Example

A buyer deposits $5,000 with the agreed escrow holder. At a successful closing, that amount is credited as the agreement and closing statement provide.

Keep the distinction clear

Earnest money is not automatically refundable or automatically forfeited. It differs from an option payment, and the contract’s contingencies, deadlines, and default provisions matter.

Related terms

Escrow · Consideration · Liquidated Damages

Keep studying

What Strengthens a Purchase Offer? Preapproval and Earnest Money

References: CFPB: Loan Estimate deposit disclosure

Pronunciation (US): ER-nist MUN-ee (capitals show stress)

Pronunciation reference: Merriam-Webster