Secure Your Earnest Money: Bank Accounts & Escrow Explained

💰 What Is Earnest Money in Real Estate?

Earnest money is a buyer’s initial deposit that secures their intent to purchase a property. It’s typically 1–3% of the sale price and is held in an escrow account until closing. If the deal goes through, the deposit is applied toward the buyer’s down payment or closing costs.

Learn more about escrow in real estate and how it ensures both parties are protected.

🏦 How Escrow Accounts Protect Buyers and Sellers

Once the offer is accepted, the buyer’s earnest money is deposited into a secure, neutral account — usually managed by a title company, real estate attorney, or broker. These funds cannot be accessed until both parties meet the agreed contract conditions.

• ✅ Buyers are protected if the sale falls through for valid reasons like inspection or financing contingencies.
• ✅ Sellers are protected from buyers backing out without cause, as the deposit may be forfeited.
• ✅ Funds are tracked and verified during the entire transaction, ensuring transparency and accountability.

⚠️ Common Earnest Money Mistakes to Avoid

A few simple missteps can jeopardize your deposit. Protect yourself by knowing the most common pitfalls:

• Depositing funds directly to a seller instead of a licensed escrow holder.
• Failing to verify that the escrow company is legitimate and regulated.
• Skipping written proof of receipt or confirmation of the account holding your funds.
• Not understanding refund conditions tied to financing contingencies or inspections.

Always confirm where your deposit is being held — and under what terms it can be released.

🚨 When Earnest Money Disputes Arise

If a transaction falls apart, both buyer and seller must agree in writing on how to release the escrow funds. Disputes can delay closing or require legal mediation. Learn how to handle issues in our related guide: Escrow Disputes Explained.

💼 Keep Your Sale Secure with Brokerless

Brokerless gives FSBO sellers and buyers a trusted, transparent path to handle earnest money and escrow safely through licensed MLS brokers.