An earnest payment or earnest money is a specific form of

security deposit A security deposit is a sum of money held in 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 suitabili ...

made in some major transactions such as

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...

dealings or required by some official

procurement Procurement is the method of discovering and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agency buys goods or se ...

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 In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire ...

, the earnest payment was called variously an earnest penny, Arles penny, or God's silver (in

Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through ...

Argentum Dei). It was either money or a valuable

coin A coin is a small, flat (usually depending on the country or value), round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order t ...

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 ofGod"). 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 An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacti ...

. 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 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