What is an earnest money deposit?

An earnest money deposit is a sum of money given by a potential home buyer as a show of good faith when making an offer on a property. In North Carolina, earnest money deposits are typically held in an escrow account by either a real estate attorney or the real estate broker involved in the home sale. When making an offer on a property, the buyer typically includes a good faith deposit in the contract. This shows the seller that the buyer is serious about wanting to purchase the property and is financially able to do so. The amount of the earnest money deposit is usually a percentage of the total purchase price and is outlined in the purchase agreement. If the buyer backs out of the deal for any reason, except those outlined in the purchase agreement, then they usually forfeit the earnest money deposit. If the seller backs out or fails to follow through with the terms of the agreement, then the earnest money deposit is refunded back to the buyer. In this way, the earnest money deposit serves as a sort of security for both parties involved in the transaction. The seller can be sure that the buyer is serious about purchasing the property, while the buyer can be assured that their good faith deposit will be protected if the sale does not go through.

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What is an earnest money deposit?

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