Earnest Money Deposit (EMD)

Definition

Earnest money is the deposit a buyer wires into the title company's escrow account when the offer is accepted, signaling commitment to perform. EMD is typically 1–3% of purchase price on resale transactions and 5–10% on new construction or land deals. It is credited toward the buyer's funds at close if the deal closes. If the buyer walks for a reason not protected by a contingency, the seller can keep the EMD.

Worked example

A $250,000 distressed acquisition with a $5,000 EMD (2%). At close, the $5,000 is credited toward the buyer's cash to close. If the buyer terminates after the inspection contingency expires for a reason not protected by the contract, the seller is typically entitled to retain the $5,000.

How DealIntel uses it

DealIntel's offer letter generation surfaces earnest money terms appropriate to the strategy and market — distressed sellers often demand higher EMD as a screen for non-serious offers. The platform flags any contract structure where lost EMD would meaningfully erode profit.

Related terms

• The 70% RuleA fix-and-flip discipline that caps the maximum allowable offer at 70% of ARV minus rehab and costs.
• Closing CostsTransaction costs paid at acquisition and at sale — typically 2–4% on the buy side and 5–7% on the sell side.

DealIntel's underwriting team builds and maintains the platform's six-strategy engine, 25-point kill list, and Monte-Carlo financial model. Every piece of long-form content on dealintel.io is reviewed by an underwriter with direct experience scoring residential investment deals.