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Real estate glossaryGeorgia-specific rule

Earnest money

Earnest money is a deposit a buyer provides under a purchase agreement to show seriousness and support the transaction.

Exam area: Real Estate Practice in Georgia

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What does “earnest money” mean in real estate?

Earnest money is a deposit a buyer provides under a purchase agreement to show seriousness and support the transaction. Its holder, deposit timing, disposition, and remedies are controlled by the contract and applicable trust-fund rules.

How is “earnest money” different from the closest wrong answer?

Earnest money is not the down payment and does not by itself create the contract. It is a contract deposit that is usually credited at closing if the transaction proceeds.

What is the Georgia-specific rule?

When a Georgia broker receives earnest money, the broker must handle it under the contract, license law, and Commission trust-account rules. The contract controls whether it is refundable in a particular termination.

Worked exam example

Scenario

A buyer delivers $5,000 after acceptance. The contract directs the named holder to keep it in trust and credit it toward the buyer's closing funds if the sale closes.

What is the most common exam trap?

Trap correction

Do not assume the seller automatically receives the money after every buyer default or that the buyer automatically recovers it after every termination.

Original exam check

Apply the definition

A buyer delivers $5,000 in earnest money after acceptance. Later the buyer terminates and the sale falls through. The seller says the money now belongs to the seller. What decides who receives the deposit?

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Related terms to learn next

Trust funds

Trust funds are money or property a Georgia broker receives on behalf of another person in a real estate matter, including earnest money, rents, security deposits, and other client or customer funds when held by the broker.

Trust account

A trust account is a separate, federally insured account in which a Georgia broker holds money belonging to others in connection with real estate activity, including earnest money when the broker receives it.

Liquidated damages

Liquidated damages are an amount or measure the parties agree in advance will be recoverable after a specified breach, when the clause is enforceable rather than an unlawful penalty.

Due-diligence period

A due-diligence period is a negotiated contract window during which a buyer may investigate the property and exercise the termination rights stated in the agreement, often for any reason when the contract grants that broad right.

Recommended next complete lesson

Continue with Real Estate Practice in Georgia complete lesson. It places this term inside the full rule, worked examples, exam traps, and mixed practice required for mastery.
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