I’m getting callers who think that the parties do not have an executed contract until they actually deposit the earnest money. That isn’t true.

Earnest money is not necessary to make an otherwise accepted offer into a valid contract. Earnest money is a buyer’s performance obligation and is required to be deposited after a contract is fully executed. If a buyer does not pay the earnest money in the time required by the contract, a seller could potentially exercise his options under a default provision. A contract could become effective even if no earnest money is required in the agreement.

—Laura Miller, staff attorney