Earnest Money – also known as good faith deposit – is the money deposit from the buyer to the seller when signing a purchase contract. It demonstrates the buyer’s intention to purchase the property and buys the buyer the time to perform the necessary due diligence before purchasing the property.
Earnest money isn’t always needed, it typically is 1% of the purchase price, but it can vary depending on the seller and market situation.
The earnest money is credited towards the property’s purchase price if the transaction is successful.
If the buyer pulls out of the deal, the money will often stay with the seller, whereas the money is refunded to the buyer if the seller pulls out.
