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Earnest payment
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.
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