Earnest Money
Also known as Earnest Money Deposit, EMD
A good-faith deposit you put down when making an offer to show you're serious about buying.
In plain English
Earnest money is a deposit — usually 1%–3% of the purchase price — held in escrow after your offer is accepted. If the deal closes, it's applied toward your down payment or closing costs; if you back out for a reason not covered by your contingencies, you may forfeit it.
Understanding what does and doesn't let you keep your earnest money is one of the most important parts of reading a purchase agreement before you sign it.
Where you'll run into it
Guides and tools on TheBuyingPath that cover earnest money in context.
Related terms
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