With an offer the buyer includes a deposit of several thousand dollars to show serious intent. That deposit is earnest money. It is held in escrow and applied to the purchase price at closing if the deal completes.

If the buyer defaults on the contract without a valid contingency, the seller may be entitled to keep the earnest money as liquidated damages. If the deal dies because of a failed inspection or financing contingency, the deposit is usually returned. Local custom influences the typical amount; higher deposits can strengthen an offer in competitive markets.

Clear contract language and proper escrow handling prevent later disputes. Buyers should never hand earnest money directly to the seller. The deposit is both a gesture of good faith and a form of security for the seller.

A meaningful earnest-money check signals that the buyer intends to close.