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.

Matt Abadi is the founder of DealIntel. He leads the development of the platform's six-strategy underwriting engine, 25-point Kill List, and Monte-Carlo financial model — the institutional analysis stack DealIntel applies to every fix and flip deal. DealIntel was founded in 2025 with the central thesis that knowing when not to invest is the most valuable number on the page.