An earnest money check or earnest money deposit is one way to prove to a seller that you are serious about purchasing the home. Typically 1 to 2 percent of the purchase price, the deposit is held in escrow until closing. In a successful sale, the earnest money check is applied to your down payment.
A deposit like this forces buyers to be serious when they make an offer on a home. Without it, buyers could make offers on homes all around town, effectively taking those homes off the market while they take their time to decide. An earnest money deposit is one way of discouraging that behavior.
The deposit also helps to compensate a seller should they have to relist their home. Be aware that you may not get your deposit back if you back out for a reason not listed in the purchase agreement. Know how the deposit will be handled if the deal falls apart, and make sure that process is laid out in your purchase agreement.
In a hot market, you’ll find that a seller may ask for a higher earnest money deposit than normal. This reflects interest in the home, the temperature of the market, and the amount of competition a buyer has. If you’re really serious about this home, the seller wants you to prove it in dollars.