When you buy a home it is expected you will put up an earnest money deposit. The earnest money shows that you are serious about purchasing a property and are not going to be wasting the seller’s time.
If there was no earnest money, a buyer could choose not to move forward without any financial harm. The earnest money is insurance the buyer will perform their obligations according to the contract.
Earnest money funds are typically between one to five percent of the home’s purchase price. These monies are held by one of four parties – the seller’s real estate company, a title company, a dedicated escrow agent, or the seller’s attorney.
In most real estate transactions, it’s held by the listing agency in an escrow account. The monies remain in escrow until the property closes. In the event the transaction falls through, the earnest money will be given to whoever is legally entitled to have it.
Who keeps the earnest money depends on whether the buyer followed the contract terms or not.