Earnest money
A deposit the buyer puts down after the offer is accepted to show they are serious. It is held in escrow or a trust account and usually goes toward the down payment or closing costs at closing.
Also called: EMD, earnest money deposit, good faith deposit, deposit
Related terms
An arrangement where a neutral third party holds money and documents until every condition of the sale is met. Some states use escrow companies to close; others use title companies or attorneys.
The date by which the buyer must deliver earnest money after the offer is accepted, often within one to three business days. Missing it can put the buyer in default.
The signed contract between buyer and seller that sets the price, deadlines, contingencies and terms of a sale. Once both sides sign, the property is under contract.
A condition in the contract that must be met for the sale to go forward, such as an inspection, loan approval or appraisal. If it fails within the deadline, the buyer can usually cancel and keep the earnest money.
When one side fails to meet its obligations under a contract or loan. In a purchase, the contract spells out remedies, which often include the seller keeping the earnest money.
The neutral party who holds funds and documents, follows the written instructions of buyer and seller, and pays everyone out at closing. Depending on the state, this is an escrow company, title company or attorney.