Free Earnest Money Agreement Template: Sample & FAQs (2024)

Other Names: Earnest Payment Earnest Money Deposit Earnest Money Contract

What is an Earnest Money Agreement?

An Earnest Money Agreement is a great way for a potential buyer or renter of real estate to show that he or she is serious about purchasing or renting. In a way, it's a lot like a security deposit. Generally, both parties will sign an Earnest Money Agreement and then the potential buyer will deposit a certain sum of money. This is sometimes called an "earnest of good faith" and is meant to demonstrate that the buyer is serious about the purchase. Oftentimes, this original payment is held by a neutral party, such as an escrow account or a trust, and the payment is usually credited towards the total purchase or rental price. Once the payment is made, the seller then removes the property from the market and both parties work out the final details. Note also that while an Earnest Money Agreement is most often used for real estate purchases, it also works for renters who want to show their prospective landlord they're serious about moving into a property.

An Earnest Money Agreement is a commonly accepted first step for property sales or rentals. It helps show that the buyer or renter is making a serious offer and often serves as a kind of down payment when the sale actually goes through. An Earnest Money Agreement (or Earnest Money Deposit) memorializes the amount of money in question and helps keep both parties honest until the actual purchase is made and the deed is transferred.

When to use an Earnest Money Agreement:

You want to make a serious offer on real property.
You have agreed to sell real estate to a buyer but the details aren't yet finalized.

Sample Earnest Money Agreement

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EARNEST MONEY AGREEMENT

I. OVERVIEW

II. RECITALS

WHEREAS, the Seller Landlord is in the process of selling renting the property located at , , (hereinafter referred to as "the Property"); and described hereto attached as Exhibit A (hereinafter referred to as "the Property"); and

THEREFORE, in consideration of the premises and mutual covenants herein, the parties hereto agree as follows:

III. TERMS

EARNEST MONEY. Upon mutual execution, the parties shall deposit a signed copy of this agreement and Buyer Tenant will immediately deposit the sum of , as Earnest Money, in the form of (hereinafter the "Earnest Money") with , , , . The earnest money shall only be deposited after Landlord and Tenant Buyer and Seller have signed this agreement. This earnest money will become part of the purchase price of the Property and will be applied to any applicable down payments and closing costs owed by the Buyer. This earnest money will be applied to paying down the total rental price owed by the Tenant.

ENTIRE AGREEMENT. All understandings and agreements previously existing between the parties, if any, are merged into this Agreement, which alone fully and completely expresses their agreement. Neither party will rely upon any statement or representation made by the other not embodied herein. This Agreement may be modified only by a written amendment by all parties.

SEVERABILITY. If a court holds any provision of this Agreement to be illegal, invalid or unenforceable, the remaining provisions shall remain in full force and effect and the parties will amend this Agreement to give effect to the stricken clause to the maximum extent possible.

SIGNATORIES. This Agreement shall be signed by and . on behalf of by ,, by and on behalf of by ,, by and shall be effective as of the date first above written.