Earnest money is deposited into an escrow account upon mutual acceptance of an offer. Keeping the earnest money is the seller’s only remedy if the buyer fails to close the deal without legal cause. The buyer can get the earnest money back if the deal fails due to unsatisfactory inspection results, low appraisal result, financing denied by lender, the seller backing out, or other scenarios that are not the fault of the buyer. If the buyer simply gets cold feet late in the purchase process and backs out, the seller has the right to contend for the earnest money. When the sale goes smoothly, the earnest money acts as an “early down payment” and goes straight toward the buyer’s down payment and closing costs. For example, if you are putting $15,000 down, and you deposited $3,000 earnest money, you would need to bring the remaining $12,000 at closing (plus any closing costs).
