An earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of
real estateor publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase. When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.
In very lively markets (as experienced on the East and West coasts of the US between 2000 and 2005) earnest money deposits could be as high as 5% of the sales price or more. In other communities, as little as $500 or $1000 is acceptable.
If the seller accepts the offer, the earnest money is held in
escrowby the real estate broker(in states like New York) or by a settlement or title company(in states like California, Florida, and Texas) until closing and is then applied to the buyer's portion of the remaining costs. If the offer is rejected, the earnest money is usually returned, since no binding contract has been entered into. If the buyer retracts the offer or does not fulfill its obligations under the contract, the earnest is forfeited. Therefore, it is generally in the seller's best interest to see as high an earnest money deposit as possible.
In ancient times, the earnest payment was called an earnest penny, and also known as Arles penny, God's penny, or Argentum Dei. It signified money given to bind a bargain, especially for the purchase or hiring of a servant. Black's Law Dictionary, Sixth Ed. "Et cepit de praedicto Henrico tres denarios de Argento Dei prae manibus".ref label|1728|1|^ Another related term was luck money, which was an amount given back to the buyer by the seller on the completion of a deal, for
#note label|1728|1|^1728 [http://digicoll.library.wisc.edu/cgi-bin/HistSciTech/HistSciTech-idx?type=turn&entity=HistSciTech000900240177&isize=L&q1=132]
List of real estate topics
Wikimedia Foundation. 2010.
Look at other dictionaries:
earnest payment — index pledge (security) Burton s Legal Thesaurus. William C. Burton. 2006 earnest payment … Law dictionary
earnest payment — Part payment or deposit made to demonstrate seriousness in the purchase of goods and services or to bind a contract, with the remainder due at a particular time. If the contract is breached by failure to pay the agreed balance, then the… … Business law dictionary
earnest money — earnest mon·ey n: money used as earnest Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. earnest money … Law dictionary
earnest — ear·nest / ər nəst/ n [Anglo French ernes(t) erles, alteration of Old French erres, plural of erre pledge, earnest, alteration of Latin arra, short for arrabo, from Greek arrhabōn, of Semitic origin]: something of value given by a buyer to a… … Law dictionary
earnest — earnest1 [ʉr′nist] adj. [ME ernest < OE eornoste < eornost, earnestness, zeal, akin to Ger ernst, seriousness (OHG ernust) < IE base * er , to set oneself in motion, arouse > RUN] 1. serious and intense; not joking or playful; zealous … English World dictionary
earnest — Synonyms and related words: abandoned, acquitment, acquittal, acquittance, advertent, afire, agog, alert, all ears, all eyes, amortization, amortizement, ardent, assiduous, attention, attentive, aware, awe inspiring, bail, binder, bond, bound,… … Moby Thesaurus
earnest money — A sum of money paid by a buyer at the time of entering a contract to indicate the intention and ability of the buyer to carry out the contract. Normally such earnest money is applied against the purchase price. Often the contract provides for… … Black's law dictionary
Earnest Money — A deposit made to a seller showing the buyer s good faith in a transaction. Often used in real estate transactions, earnest money allows the buyer additional time when seeking financing. Earnest money is typically held jointly by the seller and… … Investment dictionary
earnest — I adj 1. fervent, fervid, perfervid, ardent, zealous, passionate, impassioned, intense; assiduous, diligent, intent, concentrated; firm, resolute, determined, Inf. bound and determined, decided, purposeful; serious, sincere, in earnest, Inf. for… … A Note on the Style of the synonym finder
payment — n 1. remuneration, compensation, reimbursement; remittance, installment, handsel, Insurance. premium; settlement, liquidation, quittance, discharge, reckoning; refund, rebate. 2. expenditure, outlay, disbursement, expense; defrayal, contribution … A Note on the Style of the synonym finder