Earnest Money
A good-faith deposit a buyer puts down to show serious intent, held in escrow and applied at closing.
Earnest money is a deposit a buyer provides to show good faith when making an offer. It is held in an escrow or trust account, not by the buyer or seller directly. At closing the deposit is typically credited toward the buyer's costs.
Earnest money is not required for a contract to be valid, but it signals commitment. In a Texas residential transaction, the buyer typically delivers earnest money to the escrow agent (often the title company) named in the contract, within the time the promulgated contract specifies.
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Texas Contracts & Forms (8% of the exam)
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Try 5 free questionsRelated terms
- Commingling
Mixing money held in trust for others with a broker's personal or business funds, which is a TRELA violation.
- Conversion
Using money held in trust for others for the broker's own benefit, a serious TRELA violation that can carry criminal penalties.
- Statute of Frauds
The rule that contracts for the sale of real property must be in writing and signed to be enforceable.
- Termination-Option Period
A negotiated period in the TREC residential contract during which the buyer may terminate for any reason, in exchange for an option fee.
This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.