How does Earnest Money work?

[Tanner Flint]

I have been looking into wholesaling for a while now. I am curious, how does Earnest money work?

[Heath Ryans]

@Tanner Flint earnest money is/can be a part of every real estate transaction. If the seller decides he or she wants earnest money put down, you send that amount to the title company to hold in escrow until the day of closing. What that money does is essentially act as your word that you are going to close. If you do close, that money goes towards the purchase amount, reducing it by x amount. If, however, you back out of the transaction for anything that isn't built into the contract as a contingency, the seller gets the money and you walk away.