Earnest Money

Earnest money is a deposit made by a homebuyer to show they are serious about purchasing the property. It’s like putting down a security deposit when you rent an apartment, but for buying a home. This money is held in an escrow account and goes towards your down payment and closing costs once the sale is finalized. If you don’t go through with the purchase of the property because you changed your mind or don’t meet the terms of the contract by certain deadlines, the sellers could keep your earnest money unless it is outlined in the purchase and sale that it will be refunded to you.

Typically, if a buyer backs out for reasons covered by contingencies (see contingencies) in the contract—like failing to secure financing or discovering significant issues during a home inspection—your earnest money may be returned.