What Is Earnest Money Deposit (EMD)?
Also known as: EMD, Earnest Money
An earnest money deposit (EMD) is a good-faith payment a buyer puts down when signing a purchase contract, showing the seller the offer is serious. It is typically held in escrow and applied at closing.
An earnest money deposit (EMD) is a good-faith payment a buyer puts down when signing a purchase contract, showing the seller the offer is serious. It is typically held in escrow and applied at closing.
Earnest Money Deposit (EMD) explained
EMD signals commitment. When a wholesaler puts a property under contract, the seller often expects an earnest money deposit held by the title company or attorney. If the deal closes, the EMD is credited toward the purchase. If the buyer backs out for a reason not protected by the contract, the seller may keep it.
Wholesalers manage EMD risk in a few ways: negotiating a small deposit (sometimes as low as $100 to $1,000 on distressed deals), using an inspection or due-diligence contingency that allows a refund within a set window, and lining up the end buyer quickly so the deal is assigned before the deposit is truly at risk.
Example
You sign a contract with a $500 EMD and a 10-day inspection contingency. You assign the deal to a cash buyer on day 6. The contingency window protected your $500, and the buyer closes in your place.
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