An Earnest Money Deposit (EMD) is a deposit made by a buyer to a seller that represents the buyers good faith to make a purchase, such as the acquisition of a new home. When a buyer decides to purchase a home from a seller, both parties enter into a contract. The contract doesnt obligate the buyer to purchase the home, because reports from the home appraisal and inspection may later reveal problems with the house. The contract does, however, ensure the seller takes the house off the market while its inspected and appraised. To prove the buyers offer to purchase the property is made in good faith, the buyer makes an earnest money deposit (EMD) . The EMD is usually a percentage of the purchase price and is held in an escrow account or by a title company until the sale is completed. The EMD can be refunded to the buyer if the sale falls through due to certain contingencies, such as a home inspection revealing material issues with the property or the home appraising for a lower value than the agreed purchase price.