What Is Earnest Money

Dated: May 19 2015

Views: 433

Truth be told, every time I say “earnest money” my silly brain conjures up an image of Ernest from Ernest goes to camp.


Image title



Thankfully, earnest money has nothing to do with that guy!  Anytime you make an offer to purchase real estate you’ll want to consider making an earnest money deposit.  In Iowa, earnest money isn’t required but it is customary.  Basically, it’s a gesture of good faith that you intend to make good on your side of the contract.  The earnest deposit will be held in the listing brokerage trust account and will be credited back to you at closing on the settlement statement. 



Your real estate agent will help provide guidance on your purchase agreement/contract.  For example, if you’re getting a loan then your offer might be contingent upon financing.  If you are relying on someone buying your current house in order to buy a new house then you would have that contingency built into the offer.  If one of the contingencies outlined in your purchase agreement occurred and you ended up cancelling the purchase agreement, then you would get the earnest money back.


If for some reason you didn’t buy the house and didn’t use one of the built in contingencies then you could be in breach of contract and the sellers would likely be awarded the earnest money as their “payment” for trusting you to make good on the contract.  For example, if you woke up the day before closing and decided you’d rather move to California – you would lose the earnest money which is the price of being a flake.  


Consider the earnest money as a promise to perform on the contract. If you don’t perform then its money for time/marketing lost on the house for other prospective buyers. Just imagine how devastating it would be for the sellers without the earnest money and the buyers just walking away without a just cause. Their home had been off the market for weeks waiting for the deal to close, lost time, lost opportunities to find the right buyer, etc.


These are pretty simple examples to explain earnest money.  Please note that real life isn’t always as simple as these examples and being in breach of contract can result in big trouble – like needing a lawyer and getting sued.  Yikes!  My advice is to work with your real estate agent and if you have any legal concerns then definitely seek the advice of an attorney. Better safe than sorry. 


If you’re ready to find the “Wright” house for you – give me a call.  I’m ready to help!

Blog author image

Heather Wright

In the competitive Des Moines market, Heather Wright combines client-focused service, innovative marketing techniques, and a decade of experience to make sure that your buying or selling experience is....

Latest Blog Posts

Home Pricing Strategies Part 3

When the real estate market is a seller's market - you probably expect your house to sell very quickly, and hopefully with a LOT of offers. In fact, maybe you want to have an all out bidding war

Read More

Home Pricing Strategies Part 2

When the real estate market is a seller's market - you probably expect your house to sell very quickly. But, what happens when you don't get ANY offers on your house? We cover all of this in Part

Read More

Home Pricing Strategies

If you've been thinking about selling your house in the Greater Des Moines area, you probably wondered - how should I price it??? There are several strategies for pricing your home

Read More

House Or A Home

Out looking at new construction and a couple resale houses and this rings so true. You can definitely tell a difference between a HOME and a HOUSE. And the homes always seem to sell fast. There's

Read More