Earnest money
Earnest money is a buyer's good-faith deposit on a signed contract to buy real estate. A seller or third party holds it until closing, when it may go toward the down payment or closing costs. If the contract ends first, the contract and, for a Virginia broker's deposit, state release rules decide who receives it.
A deposit that exists only because a contract does
The Consumer Financial Protection Bureau defines the deposit by its purpose before it says anything about amounts or accounts:
Earnest money is a deposit a buyer pays to show good faith on a signed contract agreement to buy a home. The deposit is held by a seller or third party like a real estate agent or title company.
Consumer Financial Protection Bureau, mortgage key terms
The CFPB is describing a home purchase, and a purchase contract for land can carry the same kind of deposit. A buyer who signs an offer on a wooded tract or a pasture puts money behind the promise so the seller has a reason to commit the property to that buyer while the buyer does the checking. The deposit is tied to a signed contract, and why a Virginia land sale has to rest on a signed writing is explained in what documents you need to sell land.
How much the deposit is, who holds it and on what terms it comes back are all written into that contract. There is no Virginia figure to look up. A contract can tie the refund to its list of conditions, each a contingency the sale depends on, such as financing or a satisfactory inspection.
Earnest money is also not the only money that can change hands before a closing. A payment made for the right to buy a property later, at a set price and within a set time, is a different payment for a different promise, defined under option contract.
Five business banking days, an insured account, then the table
Once the contract is ratified, Virginia sets a clock for a deposit that a real estate firm will hold.
Upon the ratification of a contract, an earnest money deposit received by the principal broker or supervising broker, or an agent of such principal broker or supervising broker, that is to be held in the firm's escrow account shall be placed in such escrow account by the end of the fifth business banking day following ratification, unless otherwise agreed to in writing by the principals to the transaction, and shall remain in that account until the transaction has been consummated or terminated.
Va. Code 54.1-2108.2
The Real Estate Board's regulation describes the account itself. Under 18VAC135-20-181 A 1, if money is to be held in escrow, a firm must keep one or more federally insured escrow accounts, into which all funds received in connection with a real estate transaction must be deposited. Under 18VAC135-20-181 A 2 a, earnest money deposits are on the list of money that must be deposited there, unless all principals to the transaction have agreed otherwise in writing. That regulation took over from 18VAC135-20-180, the former escrow section, which was repealed effective April 1, 2026.
Then comes the closing table. The CFPB says that if the sale closes, the earnest money may be applied to closing costs or the down payment. What happens to it when a land deal fails instead, and what a broker holding the money does next, is the subject of earnest money on a land purchase contract. The deposit and its conditions, followed step by step from ratification to closing, are in earnest money and contingencies.
About to put earnest money down on a signed offer?
Tell Lowell the property and who the contract names to hold the deposit, and he will go over which Virginia escrow rules reach that holder; refund terms stay with the contract and an attorney. No cost, no obligation.
Got it. Thank you.
We'll be in touch shortly with an honest read.
Questions about this term
Can the real estate firm holding a deposit take its commission out of it?
Not before the sale closes, unless everyone agrees in writing. Under 18VAC135-20-181 B 1 b, a licensee is not entitled to any part of the earnest money deposit as part of the licensee's commission until the transaction has been consummated, unless all principals to the transaction have agreed otherwise in writing.
Is earnest money the same thing as the down payment?
Not while the contract is open. The CFPB describes earnest money as a good-faith deposit on a signed contract that, if the sale closes, may be applied to the down payment or to closing costs. Before then, a firm holding it treats it as escrow money: 18VAC135-20-181 A 2 a lists down payments and earnest money deposits among the funds that go into an escrow account unless all principals agree otherwise in writing.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Mortgage key terms: earnest money Consumer Financial Protection Bureau
- Va. Code 54.1-2108.2: earnest money deposits held by a broker Code of Virginia
- 18VAC135-20-181: maintenance and management of escrow accounts Virginia Administrative Code, Real Estate Board
- 18VAC135-20-180: former escrow section (repealed) Virginia Administrative Code, Real Estate Board
- Va. Code 11-2: contracts that must be in writing Code of Virginia