Earnest money in a real estate transaction is a deposit made by the buyer to demonstrate their intention to purchase the property. The amount of earnest money varies depending on the location, price of the property, and local customs. In general, it is typically around 1-3% of the purchase price of the property.

The earnest money is held in an escrow account until the closing of the transaction, at which point it is applied to the down payment or closing costs. If the sale falls through due to the fault of the buyer, the earnest money may be forfeited. Conversely, if the sale falls through due to the fault of the seller, the earnest money is usually returned to the buyer.

The purpose of the earnest money is to provide the seller with some assurance that the buyer is serious about the purchase and to compensate the seller in the event that the buyer fails to complete the transaction.

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