Financing
Earnest money
A buyer’s deposit delivered under a purchase agreement to show commitment and handled according to the contract and applicable rules.
Glossary
Financing
Earnest money is a purchase-contract deposit, commonly held by an escrow holder, title company, broker, or attorney as the agreement directs. It is not automatically the seller’s money and is different from a mortgage down payment.
The contract should identify the amount, delivery deadline, holder, application at closing, conditions for refund or release, default consequences, and dispute process. Local law and professional rules can govern custody and disbursement.
Example: an inspection contingency may permit timely termination and return of the deposit, while a missed notice deadline may change the result. The signed agreement and documented notices control; a generic glossary rule cannot.
Records to preserve
Keep the executed agreement and amendments, delivery receipt, escrow confirmation, contingency notices, deadline calendar, release instructions, and final settlement statement. Never infer release authority from deal status alone.
When a dispute occurs
Do not move or promise the funds based on one party’s instruction when the escrow terms require joint direction, a court order, arbitration, or another process. Obtain advice from the closing professional or transaction counsel.