When is earnest money due? Typically, sellers want the buyer to deposit the funds within three business days of the contract’s execution. What that means is that you need to put the money in the escrow account right after the seller signs the document. 

  • The money is held in escrow by an independent third party 
  • Your agent deposits the money immediately upon receipt  
  • Your attorney will call for the escrow company to deliver the funds on the day of closing 

Do not delay writing either delivering either a cashier’s check or wire transfer immediately after the seller signs the contract. In most cases they stipulate in the agreement that you have only a specified time or you are in breach of contract. 

Who Keeps Earnest Money? 

An escrow company keeps the earnest money. Investopedia tells us that depending on where you buy the house one of the following may hold the money: 

  • seller’s attorney 
  • Real estate broker 
  • Title company 

No matter who keeps the money, they should keep it separate from any other accounts. Also, they should never release it to the seller without written authorization from the buyer or their agent. 

When Must a Broker Deposit Earnest Money? 

The broker deposits the money as soon as they receive it. In fact, with new forms of technology, you can deposit the money electronically and bypass giving a check to your agent. They must not hold on to the money for any reason. In fact, they will want to get the money into the bank as soon as possible. Nobody wants to hang on to such a large amount of money for no good reason. 

Further, if the buyer (or their agent) does not deposit the money on time they will be in breach of contract. If this happens the seller may terminate the transaction and find another buyer.

Who Delivers Earnest Money? 

According to NJ Lenders Corporation there are two points in time when earnest money changes hands. They are: 

  • When the buyer delivers the funds to the escrow agent 
  • When the escrow agent delivers the funds to the attorney or title agency 

In the first case, the buyer usually has a three-day window to deposit the money in an escrow account. Therefore, most sellers insist on a cashier’s check or a wire transfer. Personal checks can bounce, and both sides want a paper trail that cash cannot provide. 

On the closing day, the escrow agent releases the funds to the attorney to use to finalize the transaction. They will not release the funds earlier except under extraordinary circumstances agrees upon by both sides. 

Final Thoughts

Earnest money is due almost immediately, within three business days in most cases. In fact, many buyers attach the cashier’s check to the contract to underscore their credibility. This is the first opportunity for the buyer to show their commitment to see the deal through. 

While no laws require earnest money deposits, they are important for the seller because it protects them from fickle buyers. In a competitive market it is very important, and the attorneys write the terms, including the exact amount, into the contract.