An earnest payment or earnest money is a specific form of

security deposit A security deposit is a sum of money held in trust law, trust either as an initial part-payment in a purchasing process (often used to prevent the seller's selling an item to someone else during an agreed period of time while the buyer verifies the ...

made in some major transactions such as real estate dealings or required by some official procurement processes to demonstrate that the applicant is serious and willing to demonstrate an earnest of good faith about wanting to complete the transaction. In the Middle Ages, the earnest payment was called variously an earnest penny, Arles penny, or God's silver (in Latin Argentum Dei). It was either money or a valuable coin or

token Token may refer to: Arts, entertainment, and media * Token, a game piece or counter, used in some games * The Tokens, a vocal music group * Tolkien Black, a recurring character on the animated television series ''South Park,'' formerly known as ...

given to bind a bargain, notably for the purchase or hiring of a servant. According to Black's Law Dictionary (sixth ed.), ''Et cepit de praedicto Henrico tres denarios de Argento Dei prae manibus'' ("And he took it from the aforesaid Henry ealed by a silver three pence iece handed over

n the sight of N, or n, is the fourteenth letter in the Latin alphabet, used in the modern English alphabet, the alphabets of other western European languages and others worldwide. Its name in English is ''en'' (pronounced ), plural ''ens''. History ...

God"). A potential buyer of property of high value such as residential real estate 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. If the seller accepts the offer, the earnest money is held in trust or escrow. These funds may be held directly by the

real estate broker A real estate agent or real estate broker is a person who represents sellers or buyers of real estate or real property. While a broker may work independently, an agent usually works under a licensed broker to represent clients. Brokers and agen ...

(as in the State of New York) or by a

settlement Settlement may refer to: *Human settlement, a community where people live *Settlement (structural), the distortion or disruption of parts of a building *Closing (real estate), the final step in executing a real estate transaction *Settlement (fina ...

or title company (as in states like California, Florida, and Texas). When the transaction is settled then the deposit is 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.

References

Payment systems Common law legal terminology Property law legal terminology {{Realestate-stub

See also

References