What Is Earnest Money?
Earnest money is a deposit a buyer makes when they submit an offer to purchase real property. It demonstrates the buyer's good faith commitment to the transaction. In Florida, the earnest money deposit is held in escrow by the listing broker, the buyer's broker, the title company, or an attorney until closing.
If the transaction closes successfully, the earnest money is credited toward the buyer's purchase price and closing costs. If the buyer defaults (backs out without a valid contractual reason), the seller may be entitled to retain the earnest money as liquidated damages.
Florida Earnest Money Rules
The standard FAR/BAR (Florida Association of Realtors / Florida Bar) residential contract governs earnest money in most Florida transactions:
- Amount — There is no statutory minimum. The amount is negotiated between the parties. Typical amounts range from 1% to 3% of the purchase price for residential transactions, and up to 10% for commercial deals.
- Deposit timeline — The contract specifies when the earnest money must be deposited (usually within 3 to 5 business days of the effective date).
- Escrow holder — The earnest money must be held in a separate escrow account, not commingled with the holder's operating funds. Florida law requires real estate brokers to maintain escrow accounts under Chapter 475, Florida Statutes.
- Inspection period — Under the standard FAR/BAR contract, the buyer can cancel during the inspection period and receive a full refund of the earnest money, regardless of the reason.
When the Buyer Gets the Earnest Money Back
- The buyer cancels during the inspection period
- A financing contingency is not met (buyer cannot obtain the loan)
- The seller cannot deliver marketable title
- An appraisal contingency is not met
- Both parties mutually agree to cancel the contract
Earnest Money Disputes
If the buyer and seller disagree about who is entitled to the earnest money, the escrow holder cannot release the funds without mutual written instructions or a court order. Under Section 475.25, Florida Statutes, a broker holding disputed earnest money has specific options: request a written escrow disbursement order from the Florida Real Estate Commission (FREC), submit to mediation or arbitration, or file an interpleader action with the court.
Related Terms
- Escrow — Where earnest money is held
- Closing Disclosure — Shows earnest money credited at closing
- Marketable Title — Failure to deliver can trigger a refund
- Title Insurance — Title issues can affect the earnest money
Barnes Walker Escrow Services
Barnes Walker Title holds earnest money deposits in trust escrow accounts for residential and commercial transactions throughout Southwest Florida. Submit a title inquiry for assistance.
Florida Law Reference
Fla. Stat. § 475.25
Florida law requires real estate brokers to maintain escrow accounts for deposits and establishes dispute resolution procedures when buyer and seller disagree over earnest money.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC