What Happens to the Earnest Money on My Contract?

Reblogger Gabe Sanders
Real Estate Agent with Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales 3090099

Something that is often misunderstood and asked during the sales process:


Original content by Debbie Reynolds TN Broker: 208698

What Happens to the Earnest Money I Submitted?


MoneyMost buyers ask if the check will be cashed or held until closing? Buyers want to know if they get the money back if they change their minds. They want to know if the offer doesn't go through will they get their money back. What if the seller doesn't fulfill their part of the agreement?


These are valid questions and the agent should answer them according to state laws and rules. In Tennessee, there are strict rules as to what happens to earnest money and how it is to be disbursed. Where does the earnest money go?


First you must understand what earnest money is. It is a show of good faith to the seller. In other words putting your money where you mouth is. An offer with substantial earnest money gets the attention of the seller. It shows that the buyer has skin in the game and has some financial strength and is taking a risk, too.


State law in Tennessee says if the broker holds the money it must be deposited promptly into the broker's escrow or trust account. This account is set up solely to hold client and customer money. It can be held by either the listing broker or the selling broker. Another practice that is allowed is that the escrow company, title company or closing attorney may hold the money in lieu of the broker. They deposit it into their company's trust account.

Whichever way it is done, the buyer and seller must decide and must be stated and  agreed on the sales contract. Borkers prefer a cashiers check or personal check rather than cash. If the buyer is getting financing, underwriters do not like cash payments and it can cause a problem.


The buyer and seller can decide to move forward with no earnest money. They can agree to delay the payment of the money. They can agree for the seller to receive it as a non-refundable deposit. Make sure the terms are clearly spelled out in the purchase and sale agreement. 


Once the check is turned over by the buyer it will be deposited in the escrow account unless otherwise agreed by the buyer and seller in writing. The check must be good funds. If it should bounce, the seller is to be notified. The buyer is given a chance to make it good by presenting certified funds. If this doesn't happen, according to Tennessee contracts the seller can opt to terminate the contract or move forward without it. 


Once the money is in escrow the only ways to get it out are as follows:

  • The contract closes and the check is credited to the buyer's sale at closing.
  • One of the parties breaches the contract. If the buyer breaches the earnest money will default to the seller. If the seller defaults, the buyer will get his earnest money back.
  • The parties can mutually agree to terminate the contract. The money can be divided upon the wishes of the parties.
  • The buyer's contract was contingent on financing, inspection, appraisal or other terms and buyers acting in good faith was unable to perform.
  • If the buyer and seller cannot agree as to the release of earnest money, the broker is able to file an Interpleader Action with the court to let a judge decide. 

If the contract closes, the earnest money will be given as a credit to the cost of sale and purchase price in the buyer's behalf. If all the money is not needed, the balance is return to the buyer as a refund.


For real estate services in Clarksville, TN contact The Real Debbie Reynolds at 931-320-6730.



 Centruy 21 Platinum Properties2130 Wilma Rudolph Blvd.

Clarksville, TN 37040

When you need Real Estate services in Clarksville TN

                  it would be my pleasure to assist you!                             

Debbie Reynolds
"The Real Debbie Reynolds"

Check out all Clarksville TN Real Estate on My Website

931-771-9070 Office | 931-320-6730 Cell

Clarksville TN Homes 


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Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

what a great re-blogg from our friend Debbie Reynolds  I could be inspired and write a post about an incident I had....Endre

Dec 06, 2018 10:52 PM #1
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for reblogging the post. I hope others will read it too and learn 

Dec 07, 2018 02:27 AM #2
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.

A great reminder for buyers what happens in different situations

Dec 07, 2018 04:07 AM #3
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Gabe, great choice for a reblog, and did see Debbie's original, and she did a great job.

Dec 07, 2018 06:46 AM #4
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thank you very much, Gabe, for sharing this excellent reblog selection.

Dec 07, 2018 11:11 AM #5
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Another great post by Debbie! Excellent one to reblog as it applies to all markets, Gabe!

Happy Friday!

Dec 07, 2018 12:15 PM #6
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gabe, Debbie Reynolds did a great job on this blog, this is a good one to share.

Dec 07, 2018 03:03 PM #7
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thank you for stopping by and taking the time to read my re-blog.

Jan 12, 2019 08:36 AM #8
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks for your comments. It’s always good to hear from you.

Jan 12, 2019 08:37 AM #9
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Stuart Florida Real Estate
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