Earnest Money or "what is EMD"?

Real Estate Agent with Nesbitt Realty at Condo Alexandria 0225-089134

Money money moneyI recently had a client ask me what "EMD" was. EMD is an acronym for Earnest Money Deposit. Earnest money is money paid by the buyer to a neutral fund to show that the buyer is serious. This money is paid at the time that an offer is made to purchase a property. The buyer pays this money into an "escrow account" to indicate that this the offer is serious and real.

The earnest money is deposited into an escrow account. An escrow account is a neutral bank account. Depending on the terms negotiated the earnest money can be held by the buyer's agent, the seller's agent or a neutral third party. No matter who holds the money there are strict laws governing the handling and disbursement of earnest money. The escrow agent (the entity that holds the escrow money) cannot commingle (or mix) these funds with operating funds or personal funds. The escrow agent can only release those funds as specified by the contract or as agreed by both parties to the contract. At closing, the earnest money is released and applied to the purchase price.

In the event the offer isn't accepted, the earnest money is released to the purchaser. In the event the offer is accepted but the sale doesn't close, then the sales agreement generally spells out the conditions under which the buyer would forfeit the earnest money. In most cases, if the seller meets all the terms of the contract, the seller will keep the earnest money. If the seller does not meet the terms of the contract, then the buyer, may receive a total or partial refund of the earnest money. If the sale cannot close due to a contingency such as financing or appraisal, the money is generally released to the buyer.

The amount of earnest money deposit varies based on the type of property being purchased and local market conditions. When you make an offer on a property, I can assist you to determine the appropriate amount to pay as an earnest money deposit.


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Tony and Suzanne Marriott, Associate Brokers
BVO Luxury Group @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

Earnest Money is defined as the $1,000 that the Buyer loses when in contract on one of our listings and they try to pull some "funny stuff"!

Aug 07, 2010 02:31 PM #1
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Will Nesbitt

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