BROWSE

Earnest Money

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 economics of performance margins in futures markets
search.proquest.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 …

The importance of being earnest: the IMF as a reputational intermediaryThe 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 ContractUrbūn (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 FineConcurrence 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 ContractsDeterminants 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 standardsMoney 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 …



Q&A About Earnest Money


Is the amount of earnest money refundable if the deal falls through?

Yes, it is refundable.

How do you know that someone is serious about purchasing property?

By using an earnest money deposit.

When does the buyer receive their earnest money back?

The buyer may not be able to reclaim the deposit if they terminate the deal. If the seller terminates, then they will usually be awarded it.

Where do you report this information on your taxes?

You report this information on your taxes with form W-9.

How much does the IRS require for earnest money?

The IRS requires $1,000 for earnest money.

What is earnest money?

Earnest money is a deposit that the buyer makes to show good faith.

What happens when you are unable to complete your purchase of property?

You may lose your earnest money deposit if you cannot complete your purchase of property.

Who typically holds earnest money?

Earnest money is held jointly by the seller and buyer in a trust or escrow account.