Real Estate Glossary > E > Earnest Money Definition

The money buyers pay one to three business days after agreeing with the seller on a price for the home to show that they're serious about the offer. Usually 1 – 3% of the purchase price (though sometimes it's a fixed amount), the money is deposited into an escrow account via a cashier's check or money order. If the buyer is working with an attorney on the deal, the earnest money is held by the listing broker. If the sale is completed, the earnest money becomes part of the buyer's down payment; if the sale fails due to a contingency outlined in the initial Purchase and Sale Agreement, the buyer recovers the earnest money. If the buyer backs out for reasons not covered in any of the contingencies, the seller gets the earnest money.