When someone wants to buy a house or property, they often have to show the seller that they're serious about buying it. One way to do that is by giving the seller some money upfront. This money is called "earnest money."
Here's how it works:
The buyer submits a certain amount of money in U.S. Dollars as earnest money to the seller. This amount is typically 1% of the purchase price or more. This money shows the seller that the buyer is committed to buying the property.
The buyer should give the earnest money along with the purchase agreement, which is a document that outlines the terms of the sale. But if the buyer doesn't give the money with the purchase agreement, they have to give it to a third party called the "Escrow Agent" within a specific number of hours or days after the seller accepts the buyer's offer.
The Escrow Agent is a person or company who is trusted to hold the earnest money until the sale is finalized or the agreement is canceled. In this case, the Escrow Agent could be the real estate broker representing the seller, the real estate broker representing the buyer, or some other trusted party.
Once the Escrow Agent receives the earnest money, they have to deposit it into a special bank account called an "escrow account." They keep the money in this account until the sale is completed or if the agreement is canceled.
If the buyer's offer is not accepted by the seller, the Escrow Agent will return the earnest money to the buyer promptly.
However, if the buyer doesn't give the earnest money to the Escrow Agent on time, the seller has the right to cancel the agreement. The seller can do this by sending a notice of termination to the buyer before the Escrow Agent receives the earnest money.
So, in simple terms, the buyer needs to give some money upfront to show they're serious about buying the property. They have to give it to a trusted person or company, like a real estate broker, who will hold the money until the sale is complete or canceled. If the buyer doesn't give the money on time, the seller can cancel the agreement.