What is “earnest money” or a “good faith deposit”?
When the buyer signs the offer to purchase, the buyer usually deposits a sum of money with the seller, the seller’s real estate agent, or the escrow company. Earnest money is not the same thing as the buyer’s down payment although, if the sale goes through, it will be applied to the down payment. Earnest money symbolizes the buyer’s commitment to take the necessary steps to complete the purchase, for example obtaining a loan. Thus, if a prospective buyer does little or nothing to complete the sale, he or she risks losing the earnest money deposit.
