Earnest Funds Deposit

In Florida, for a sales contract to be valid, the buyer must offer a valuable consideration in return for an agreement to sell. Apart from the sales price, an important consideration is the earnest deposit made by buyer at the time of agreeing the sales contract, or shortly thereafter.

The earnest deposit is normally an amount of money deposited by the buyer, usually with the title company, which will handle the closing, and demonstrates good will and good intent to close the transaction.

The earnest deposit remains the property of the buyer and is ultimately credited to buyer, on the closing statement, at closing. However, if buyer breaks the terms of the contract, then the earnest deposit may be given up and credited to the seller.

From the buyer's viewpoint, the deposit should be as little as possible to satisfy the seller. For the seller, the objective is to obtain a substantial deposit which demonstrates the ability and motivation of the buyer to purchase the home and which will deter the buyer from reneging on the terms of the contract.

In practice, it is more likely that a buyer will offer and seller will agree a lesser deposit when it is a cash sale with an early closing date. In a seller's market, the deposit may be higher. In a buyer's market, the seller should be prepared to be more flexible.