Pacific Escapes Real Estate, inc

Earnest money, also known as a “good faith deposit,” is a sum of money that a buyer pays to a seller or a real estate agent as a show of good faith in a transaction. This deposit is typically made when a buyer submits an offer to purchase a property and is usually a small percentage of the purchase price, often around 1% to 5%.

The purpose of earnest money is to show that the buyer is serious about purchasing the property and is willing to commit some money to demonstrate that commitment. If the sale goes through, the earnest money is typically applied toward the purchase price of the property. If the sale does not go through due to a contingency specified in the purchase agreement, such as a failed inspection, the earnest money is typically returned to the buyer.

However, if the buyer backs out of the transaction without a valid reason, the seller may be entitled to keep the earnest money as compensation for the time and effort they have invested in the transaction. The specific rules and requirements for earnest money can vary depending on the laws of the state or jurisdiction where the transaction takes place, as well as the terms of the purchase agreement between the buyer and seller.