define earnest money deposit & what is its purpose
define earnest money deposit as it applies to a real estate tranaction & what happens when buyers get "cold feet"
1 Answer from Attorneys
"earnest money" defined
I can give you the definition straight out of Black's Law Dictionary: "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 forfeiture of this sum if the buyer defaults."
In other words, "earnest money" is money paid by the buyer to show that he or she is "earnest" -- that is, actually and truly interested and able to buy the property, and not just "window shopping," as it were. When the buyer gets "cold feet," typically he or she must kiss that earnest money goodbye, as it acts like a nonrefundable deposit towards the purchase price.