An earnest money deposit, sometimes known as a “good faith deposit,” is a transfer of funds made to sellers before a real estate transaction is ready to close. These funds are known as “earnest money” because they demonstrate that the prospective buyer sincerely or earnestly intends to proceed with the purchase of the home. While the earnest funds are provided to sellers, they are held by title and escrow companies until the deal proceeds.
Earnest money deposits can incentivize sellers to accept an individual’s offer because they demonstrate that the person is serious about making the purchase and can give a prospective buyer an edge in their offer if the earnest money deposit is significantly higher than other offers. Additionally, an earnest money deposit allows the buyer to prove that they can access the requisite funds needed to purchase a property.
Once a seller accepts a conditional offer from a buyer, they must take th