What typically happens to earnest money if the sale ultimately closes?

When a sale ultimately closes, earnest money is applied to the purchase price of the property being sold. This process occurs because earnest money serves as a demonstration of the buyer's good faith and commitment to completing the purchase. It is a monetary deposit that indicates the buyer is serious about their offer.

Typically, the earnest money deposit will be held in escrow until the closing occurs. At that point, the amount contributed as earnest money will be deducted from the total purchase price of the property. This means that instead of being a separate fee or cost, the earnest money effectively reduces the final amount the buyer needs to bring to closing, thereby satisfying part of their financial obligations related to the purchase. This process ensures that the seller retains the buyer's earnest money as part of the transaction, reinforcing the buyer's commitment to fulfilling the terms of the sale.