Skip To Content

What is Earnest Money?


“A sum of money paid by a buyer at the time of entering a contract to indicate the intention and ability of the buyer to carry out the contract. Normally such earnest money is applied against the purchase price. Often the contract provides for Forfeiture of this sum if the buyer defaults. A deposit of part payment of purchase price on sale to be consummated in future.”

(See an excerpt from the Texas Residential 1-4 Family Resale Contract here)Cite The Free Dictionary [Internet]. “Earnest Money”. West’s Encyclopedia of American Law, edition 2, The Gale Group, 2008 [cited 7 Nov. 2020]. 

Available from:

There are a number of ways a buyer can recoup their earnest money, one of which is the termination option. There are other ways for a buyer to receive their earnest money refunded as well, dependent on the contract terms. Ask your Texas Real Estate Agent or seek an attorney for legal advice if you have questions about your current contract terms and more understanding.