Earnest money is a deposit made by a homebuyer to demonstrate their serious intent to purchase a property. It acts as a "good faith" deposit to assure the seller that the buyer is committed to the transaction

. Key points about earnest money for a house:

• It is typically paid when signing the purchase agreement or included with the offer

• The amount usually ranges from about 1% to 3% of the home's sale price, but can be higher in competitive markets, sometimes up to 5% or 10%

• The funds are held in an escrow account by a neutral third party (such as a real estate brokerage, title company, or legal firm) until closing

• At closing, the earnest money is applied toward the buyer's down payment or closing costs

• If the deal falls through due to contingencies specified in the contract (like a failed home inspection or appraisal), the buyer usually gets their earnest money back

• If the buyer backs out without a valid reason, they may forfeit the earnest money to the seller as compensation for taking the home off the market

In summary, earnest money is a deposit that signals the buyer's commitment and protects the seller by compensating them if the buyer unreasonably withdraws from the deal