Earnest Money is the deposit that a home buyer makes at the time of their offer. The earnest money deposit indicates the buyer’s commitment to purchasing the home. Earnest money deposits vary by price point and local custom, but are typically 1-3% of the purchase price.
If a home sale closes, the earnest money deposit is applied towards the buyer’s down payment. If the buyer terminates the transaction for a reason outlined in one of their contingencies, they usually received the earnest money back. If the buyer terminates the contract for no contractual reason, the seller keeps the earnest money deposit as damages.