What are the earnest money?

The earnest is a concept that designates a signal or monetary amount that is delivered in a contract. What is best known about this concept is the deposit contract, since the term is only characterized by having a great breadth that makes it difficult to find a specific definition. The earnest money is framed within the pre-contracts, and a deposit contract is an agreement by which the two interested parties agree on a reservation right for the sale of property or real estate. That is, it is an agreement prior to the contract and in exchange for this reservation, a money signal is delivered, which is known as a deposit.

These contracts are used only within the real estate field, for example, if you are interested in the sale of a home, this contract will be signed so that the seller stops showing it. When you deliver the down payment, that is, the down payment, then you can include any other detail in them, such as that the house is available on a specific date, or when the client decides.

Types of earnest money

On the other hand, the earnest has 3 categories:

  • Penitential. The most common deposits are penitential, which means that the buyer will lose the amount advanced if the sale is not carried out. This happens because the buyer has already agreed to acquire the property or property within the established period.
  • Confirmatory. Afterwards, the confirmatory deposit category consists of when part of the total price is paid, and if one of the parties does not comply with its obligations, the other can demand compensation for damages, the fulfillment of the contract and the resolution.
  • Penalties: Finally, in the penal deposit the buyer will lose the money in advance. However, if it is the seller who defaults on his obligations, he must return double the amount of money.

Earnest money contract

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