Term Tuesday: Earnest Money Deposit

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An Earnest Money Deposit (EMD) usually accompanies an offer to purchase real property. The Earnest Money is intended to demonstrate that the potential buyer is serious about his/her intention to purchase the property. The EMD can vary from a standard of 1% of the purchase price (or less) all the way up to the total purchase price of the property (in the case of a cash offer). 


Once the deposit check has been written and the purchase offer is fully accepted, the amount of the deposit is submitted to and held with the escrow company until the transaction is complete. If the transaction is complete or if it falls out of escrow, the amount of the deposit is distributed by the Escrow company as instructed by the involved parties.