Earnest payment
An earnest payment (sometimes called earnest
money or simply earnest) is when a buyer gives
something of value (money or otherwise) to a
seller at the time an agreement is made and
it is accepted by the seller as an indication
that the agreement is complete. For the gift
to be earnest it must be given outright by the
buyer to the seller with no intention of ever
getting it back.
Typically, if the offer is accepted, the earnest
is kept by the seller and subtracted from the
purchase price, or is kept in escrow until closing,
when it is applied to the buyer's portion of
the remaining costs. If the offer is rejected,
the earnest money is usually returned. If the
buyer retracts the offer, the earnest is forfeited.
Anciently, it was called an earnest penny,
and also known as Arles penny, God's penny,
or Argentum Dei. It signified money given to
bind a bargain, especially for the purchase
or hiring of a servant.
