Also known as: earnest money deposit · earnest money · deposit
Written by attorneys · grounded in primary & secondary sources — see below
A sum of money deposited by a buyer with a seller or escrow agent to demonstrate serious intent to complete a real estate purchase contract. The deposit secures the buyer's performance and is commonly subject to forfeiture upon the buyer's breach or repudiation. It functions similarly to liquidated damages but differs because the fund is already in the aggrieved party's possession at the time of breach.
Elena Estrada places an earnest money deposit with her real estate attorney to secure a home purchase. The attorney holds the funds in a client trust account and adds a small amount of personal funds solely to cover bank service charges on that account. When the transaction closes, the earnest money is applied to the purchase price and the attorney withdraws only the exact amount needed for the charges.
Everest Holdings takes a security interest in Ella Emerson's earnest money deposit account to secure a loan. The lender perfects its interest solely by obtaining control of the account under the applicable UCC provision rather than by filing a financing statement. Upon default, the lender enforces its perfected security interest against the deposit.
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Eugene Ellsworth opens an account funded by his earnest money deposit and names his daughter as the payable-on-death beneficiary. Upon his death the remaining funds pass directly to the daughter outside probate under the POD designation. The bank pays the beneficiary without requiring further court involvement.
Emmett Egan's attorney removes the earnest money deposit records and a related weapon from the client's possession and places them in a new safe deposit box. The attorney lacks lawful justification for the removal and concealment. The privilege does not protect the physical items, exposing the attorney to potential criminal liability.
Emanuel Escobar pays an advance legal fee connected to an earnest money dispute. The attorney deposits the payment into a client trust account and withdraws funds only as fees are earned. The attorney returns any unearned portion promptly upon resolution of the matter.
Empire Logistics makes a political contribution to secure appointment as escrow agent for an earnest money deposit in a government-related transaction. The contribution is made for the purpose of obtaining the engagement. The contribution raises questions about whether the selection was based on merit rather than the payment.
An earnest money deposit is already in the seller's possession at the time of breach, so the buyer must sue for its return rather than the seller suing to collect a sum. It operates like liquidated damages but reverses the procedural posture of the claim.
The deposit is typically forfeited when the buyer breaches or repudiates the purchase contract. Courts treat the forfeiture as an alternative to a claim for actual damages provided the amount is reasonable.
An earnest money contract governs only the short period between the bargain and closing, usually a few months, and is not a financing device. A contract for deed is a long-term vendor-financing arrangement that retains legal title in the seller until the final payment.
…violate the Seventh Amendment even though there was no practice at common law for setting aside a verdict in part); Fidelity & Deposit Co. v. United States , 187 U. S. 315, 319-321 (summary judgment does not violate the Seventh Amendment).[^maj-23] The Galloway case is particularly instructive. There the party against…