Earnest payment
Posted on:3/30/2006
| 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. |
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. Et cepit de praedicto Henrico tres denarios de Argento Dei prae manibus.[1]This article incorporates content from the 1728 Cyclopaedia, a publication in the public domain. Another related term was luck money, which was an amount given back to the buyer, by the seller, on the completion of a deal, for luck.
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