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 a purchaser gives to the seller (or the seller's agent) to show 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.

The questions raised in this brochure are of special concern to real estate purchasers. Consequently, they are posed from the standpoint of the purchaser.