Questions & Answers On:Earnest Money Deposits
From "Questions and Answers On: Earnest Money Deposits":
This brochure examines issues arising from the payment of earnest money deposits prior to closing a residential real estate transaction. Since payments made before closing are not treated the same in all transactions, it is important to understand the purpose of earnest money and how it will be handled during the transaction. Earnest money is money you give to the seller (or the seller's agent) to show your good faith when making an offer to purchase the seller's property. This is usually spelled out in the offer to purchase or sales contract.
Therefore, you should always read the contract or offer to purchase before paying any money and consult your own attorney if you do not understand the purposes and disposition of any payment or any other terms in the contract or offer.