What is an Earnest Money Deposit? (Good Faith Deposit)

(This post is based on a section from The Book on Rental Property Investing. If you are reading this post – you really should probably pick up a copy of that book.)

When you join the mob, they likely will ask you to kill someone… just to make sure are serious and not wasting their time.

In real estate, people also hate to have their time wasted. Lucky for us, though – murder isn’t required to prove our sincerity.

Instead – we rely on the earnest money deposit.

The earnest money deposit, also known as a good faith deposit or simply earnest money, is money provided by the buyer when an offer is submitted as a way of showing the seriousness of the offer. This deposit is essentially the buyer saying, “Look, I really want to buy this property, and I’m putting my money where my mouth is.”

The earnest money is pledged, and should the buyer not fulfill his end of the contract, the seller can keep the money. So… yes, you can lose your earnest money! However, there are certain conditions that allow you to back out without losing it, which we’ll talk about.

But first – let’s talk about how much the earnest money deposit is.

Read more at https://www.biggerpockets.com/renewsblog