Real estate basicsEMD in real estate: what an earnest money deposit is
EMD stands for earnest money deposit – the money a buyer delivers after the offer is accepted to show the purchase is serious. It is held by the title or escrow company, credited to the buyer at closing, and returned if the buyer cancels under a contingency on time. A buyer who defaults or misses a deadline can lose it.
EMD at a glance
How much
Negotiated in the offer; often around 1–3 % of the price, higher in competitive markets. Your agent suggests the amount.
When it is due
Within a few days of the contract's effective date – the exact days are in the contract. The Texas resale contract (TREC 20-19): within 3 days. The California purchase agreement (C.A.R. RPA): within 3 business days.
Who holds it
A neutral escrow holder – usually the title or escrow company named in the contract – never the seller.
At closing
It is credited to the buyer: it goes toward the down payment or the closing costs.
When the EMD is refunded – and when it is lost
Refunded
When the buyer cancels within a contingency and on time – for example during the inspection or option period, or because the loan was not approved under the financing terms of the contract.
At risk
After the contingencies end or are removed. If the buyer then fails to close, the seller can claim it under the contract.
California: a cap
If both parties initial the liquidated damages clause of the C.A.R. RPA, the seller keeps the deposit actually paid – for a home of one to four units the buyer will live in, no more than 3 % of the price.
When buyer and seller disagree
Escrow releases the money as the contract's escrow paragraph says – usually on a release signed by both parties, after a written demand the other side does not dispute in time, or on a court or arbitration decision.
Practical tips
- Put the due date in the calendar the day the contract is signed – late earnest money can let the seller end the contract.
- Confirm wire instructions by phone with the title company, using a number you already know – never only from an email.
- Keep the escrow receipt in the file.
- In Texas the option fee is separate: it goes to the seller and is credited at closing, but it is not refunded if the buyer terminates in the option period.
Questions about EMD
What does EMD stand for in real estate?
Earnest money deposit – the good-faith deposit a buyer makes after the offer is accepted.
Is EMD part of the down payment?
It is credited to the buyer at closing, so it reduces what the buyer brings – usually applied to the down payment or closing costs.
When is earnest money due in Texas?
Under the TREC resale contract (20-19), within 3 days after the effective date; if the last day is a Saturday, Sunday or legal holiday, it moves to the next day that is not.
Can a buyer get the EMD back?
Yes, when the buyer cancels within a contingency and on time. After the contingencies end or are removed, the deposit is at risk if the buyer does not close.
What is the difference between EMD and an option fee?
In Texas the option fee buys the unrestricted right to terminate during the option period and goes to the seller; the earnest money stays in escrow and is refunded when the buyer terminates in time.
Earnest money vs down payment – what is the difference?
Earnest money is paid right after the contract is signed and held in escrow; the down payment is paid at closing. The earnest money is usually credited toward the down payment or closing costs.
Earnest money vs due diligence fee in North Carolina?
Under the NC Form 2-T the due diligence fee goes to the seller, while the earnest money deposit is held in escrow.
Calculate the dates
ClosingCode reads the contract you upload and puts the earnest money date – and every other deadline – on one calendar with reminders, in English or Spanish.
Start free trialSources: TREC No. 20-19 One to Four Family Residential Contract (Resale), paragraph 5 (effective July 1, 2026); C.A.R. California Residential Purchase Agreement (RPA, revised 12/22), paragraphs 3 and 29. Amounts and dates are set by each contract.
General information, not legal advice. ClosingCode is software; it is not a law firm or brokerage.