Definition

An earnest payment is a specific form of security deposit made in some major transactions such as real estate dealings or required by some official procurement processes to demonstrate that the applicant is serious and willing to demonstrate an earnest of good faith about wanting to complete the transaction.

What is 'Earnest Money'

Earnest money is a deposit made to a seller showing the buyer's good faith in a transaction. Often used in real estate transactions, earnest money allows the buyer additional time when seeking financing. Earnest money is typically held jointly by the seller and buyer in a trust or escrow account.

Explaining 'Earnest Money'

An earnest money deposit shows the seller that a buyer is serious about purchasing a property. When the transaction is finalized, the funds are put toward the buyer's down payment. If the deal falls through, the buyer may not be able to reclaim the deposit. Typically, if the seller terminates the deal, the earnest money will be returned to the buyer. When the buyer is responsible for retracting the offer, the seller will usually be awarded the money.

Further Reading

The importance of being earnest: the IMF as a reputational intermediary
www.tandfonline.com [PDF]
… _ A performance margin in futures markets represents earnest money to guarantee contract performance … Bibliography Froewiss, Kenneth C. (1978): “GNMA Futures: Stabilizing or Dcstabilizing?," Economic Review, Federal Reserve Bank of San … 1976): The Economics of Futures …

Urbūn (Earnest Money): Legal Framework in Islamic and Positive Law and Comparison with the Call Option Contract
brill.com [PDF]
… _ A performance margin in futures markets represents earnest money to guarantee contract performance … Bibliography Froewiss, Kenneth C. (1978): “GNMA Futures: Stabilizing or Dcstabilizing?," Economic Review, Federal Reserve Bank of San … 1976): The Economics of Futures …

Concurrence and Application of the Liability Forms for the Breach of Contract between Earnest Money, Damage Compensation and Contractual Fine
en.cnki.com.cn [PDF]
… _ A performance margin in futures markets represents earnest money to guarantee contract performance … Bibliography Froewiss, Kenneth C. (1978): “GNMA Futures: Stabilizing or Dcstabilizing?," Economic Review, Federal Reserve Bank of San … 1976): The Economics of Futures …

Determinants of Earnest Money Amounts in Real Estate Sell/Buy Contracts
www.aresjournals.org [PDF]
… _ A performance margin in futures markets represents earnest money to guarantee contract performance … Bibliography Froewiss, Kenneth C. (1978): “GNMA Futures: Stabilizing or Dcstabilizing?," Economic Review, Federal Reserve Bank of San … 1976): The Economics of Futures …

Money laundering regulations in Jordan: a positive example of Middle Eastern country earnest about catching up with international financial standards
www.ingentaconnect.com [PDF]
… _ A performance margin in futures markets represents earnest money to guarantee contract performance … Bibliography Froewiss, Kenneth C. (1978): “GNMA Futures: Stabilizing or Dcstabilizing?," Economic Review, Federal Reserve Bank of San … 1976): The Economics of Futures …

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