Earnest Money Deposit (EMD) Explained - Real Estate Terms



Earnest Money Deposit (EMD) also known as the "Good Faith Deposit" is the initial deposit you provide with your Offer to Purchase to show the seller that you are a serious buyer. In a typical real estate transaction, where there is both a selling and listing agent handling the transaction, the selling agent (buyers agent) will provide the EMD with the offer or following shortly after offer acceptance. There's no need to panic. The seller won't be running off to Vegas with your cash. There are strict protocols in place when handling a client's EMD to ensure your money is in good care! Once the listing agent receives the funds, it is immediately moved to a secured place. The listing company will hold and oversee any activity with the EMD from here on out.

If the contract goes through, your EMD will be put towards your down payment for the property. If your offer is respectfully declined, your EMD will be returned to you.

Finally, keep in mind that your EMD is in fact a deposit! and just like many other deposits, if you breach a contract, they can be held from you or used as compensation. As I have said before! Always ask your agent what your contract entails, and what is expected from you as a buyer.

Buyer tip: Be sure to ask your agent about possible delays or limitations with your EMD funds. Cash EMD's tend to have a "cap" and EMD's in the form of cheque, money order, etc. may vary in return delays. It would be unfortunate to miss the opportunity to offer on another property because you are waiting for your funds to be returned to you.


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