What is Earnest Money?

Earnest money is a term most commonly used in real estate transactions. Earnest money is a sum of money a buyer will put down to demonstrate their seriousness about buying a home. Earnest money essentially acts like a deposit on the house you are intending to buy. Generally, earnest money will be around 1% to 2% of the purchase price of the home.

Once the parties have agreed upon the price and entered into a written agreement, the earnest money is typically deposited with the brokerage of the listing agent. The earnest money will be held until the transaction closes. At closing, the earnest money will be applied towards the purchase price of the property. However, if the transaction does not close and one of the parties backs out of the deal, then the parties will need to determine which party will receive the earnest money. Determining which party gets to keep the earnest money will depend largely on the language and provisions included in the purchase agreement.

If you have questions regarding earnest money or purchase agreements, the attorneys at Hartung Schroeder can help.


Travis is an associate attorney at Hartung Schroeder. His experience includes real estate and family law, civil litigation, and working with clients to form non-profit organizations and businesses. Travis also holds a Master of Business Administration degree, which allows him to better address the needs of business clients. You can read more about Travis or get in touch with him here.