Earnest Money

Earnest money is a good-faith deposit a buyer puts up when signing a purchase contract, held in escrow and credited at closing or forfeited if the buyer walks.

Earnest money is the deposit a buyer puts up when a purchase contract is signed — a show of good faith that the buyer intends to close. It is held by a neutral third party, usually the title company or an attorney's escrow account, and credited toward the purchase price at closing. If the buyer cancels within a valid contingency, like the inspection period, the deposit comes back; if the buyer simply walks, the seller typically keeps it.

Wholesalers deal with earnest money on both sides of a deal. On the seller side, off-market contracts commonly carry small deposits — $100 to $1,000 is normal, since the seller's real protection is the closing date, not the deposit. On the buyer side, the smart move runs the other way: when you assign a contract, collect a meaningful non-refundable deposit from your end buyer — a few thousand dollars — so they have real money at stake and do not ghost you a week before closing.

What beginners get wrong: handing earnest money directly to the seller. Once cash is in a seller's pocket, it is gone whether the deal closes or not — deposits belong in escrow with a neutral party, with a receipt. Beginners also miss that "refundable" has an expiration date: after the contingency deadlines pass, the deposit is at risk. Know exactly which date makes your money non-refundable before you sign.