When you make an offer on a house, it is accompanied
by an earnest money check. Earnest money is intended to demonstrate that you are
"in earnest" about purchasing the property. The earnest money check is
made out to the listing company. What happens to this check?
The party holding the check acts as an escrow agent until you go into
closing. At that time you will receive credit for the amount of your check
against the down payment and closing costs. Real estate brokers are required by
law to keep escrow funds in a special account. These funds cannot be used to pay
office expenses, for example. If you don't complete the transaction, the
purchase contract determines the disposition of your earnest money funds. Be
sure to review this part of your contract with the Realtor.
If you are in default on your agreement, the funds may go to the sellers,
so be sure that you understand the deadlines in order to avoid breach of
contract and forfeiture of your deposit. If you have any questions, be sure to