Earnest Money
A deposit a buyer puts down to show a contract is serious, held in escrow and credited toward the purchase at closing.
Earnest money is the deposit a buyer places when a purchase contract is signed, signaling they intend to close rather than tie up a property for free. It's held by a neutral party — usually the title company or an escrow agent — and applied to the purchase price at closing.
For wholesalers, earnest money is a balancing act: too little and sellers question the offer's seriousness, too much and capital is exposed if the deal falls through. The contract's contingencies determine whether a backing-out buyer recovers the deposit or forfeits it.
Related terms