In very lively markets (as experienced on the East and West coasts of the US between 2000 and 2005) earnest money deposits could be as high as 5% of the sales price or more. In other communities, as little as $500 or $1000 is acceptable.

If the seller accepts the offer, the earnest money is held in escrow by the real estate broker (in states like New York) or by a settlement or title company (in states like California, Florida, and Texas) until closing and is then applied to the buyer's portion of the remaining costs. If the offer is rejected, the earnest money is usually returned, since no binding contract has been entered into. If the buyer retracts the offer or does not fulfill its obligations under the contract, the earnest is forfeited. Therefore, it is generally in the seller's best interest to see as high an earnest money deposit as possible.

In ancient times, the earnest payment was called an earnest penny, and also known as Arles penny, God's penny, or Argentum Dei. It signified money given to bind a bargain, especially for the purchase or hiring of a servant. Black's Law Dictionary, Sixth Ed. Et cepit de praedicto Henrico tres denarios de Argento Dei prae manibus. Another related term was luck money, which was an amount given back to the buyer by the seller on the completion of a deal, for luck.

References

See also

• List of real estate topics

External links