Earnest money

Definition

A deposit at signing, credited to the price or forfeited if you walk.

Why It Matters

On main-street deals it is often small or waived entirely, and exactly what forfeits it is negotiated in the agreement rather than assumed from how house sales work. Read the outs before you sign: a deposit that survives a financing decline and a diligence walk is cheap credibility, while one that only returns if the seller defaults is a bet on an underwriting process you do not control. Where it is held matters too, since money in the broker's account and money in escrow behave differently when a deal turns sour.

In numbers: Unlike real estate, most SMB deals close with no earnest money at all; when a broker asks for it, $10,000 to $25,000 held in escrow against a $1,000,000 LOI is the shape it takes, and the buyer's question is what, exactly, forfeits it.