An earnest money agreement is most often used in real estate purchases to exemplify the seriousness of a potential buyer or renter. The agreement involves the signing of a contract in which the potential buyer deposits a sum of money that acts as a down payment, explains Rocket Lawyer.
Renters moving into a property can also use an earnest money agreement to show their seriousness to potential landlords, according to Rocket Lawyer. Sometimes a neutral party, such as a trust, holds the initial money deposited by the buyer or renter and eventually credits it towards the total purchase or rental price of the property. At this point, the seller removes the property from the market and negotiates any final details with the buyer or renter.