Earnest money is a critical part of real estate sales. The collection, retention and disbursement of earnest money is something every real estate agent must understand and deal with. The subject is fraught with peril for the unwary agent. Disputes between buyers and sellers over earnest money are common and brokers are often caught in the middle. The use of checks and promissory notes further complicate the handling of earnest money.
A number of state laws and rules dictate the handling of earnest money from initial collection to final disbursement. The rules are arcane, complicated and not altogether consistent. Practices have grown up in the industry which complicates the handling of earnest money even more. All these factors work together to make earnest money a complicated subject.