THE OHIO ASSOCIATION OF REALTORS
Earnest money deposits are involved in almost every real estate transaction. Although not essential to the
creation of a valid and binding purchase agreement, it is the rare residential real estate transaction that does not
require the Buyer to make an earnest money deposit. The earnest money is almost always turned over to the real
estate broker who holds the money in trust for the parties to the transaction. Since the Ohio real estate licensing
laws place some very definite obligations on the broker with respect to the earnest money deposit, it is the
purpose of this paper to discuss generally the law of earnest money and, more specifically, the manner in which
the broker should handle the earnest money deposit to comply with the state licensing laws.
II. The Law of Earnest Money
"Earnest money" is nothing more than a deposit of part payment of the purchase price on a sale to be
consummated in the future. In the context of a real estate transaction, several courts have defined earnest money
as a comparatively small sum of money paid down as an assurance that the party making the offer is acting in
earnest and good faith and that " . . . if his being in earnest and good faith fails, it will be forfeited." While the
terms of the earnest money deposit should be defined in the purchase agreement, generally the deposit is
delivered to the real estate broker at the time the offer is made, and the broker deposits the earnest money in his
trust account either upon receipt or upon acceptance of the offer by the Seller, depending upon the terms of the
purchase agreement. When the real estate transaction is closed, the earnest money is either returned to the
Buyer or the Buyer is given a credit against the purchase price.
There is almost never a problem with an earnest money deposit when the real estate transaction actually closes.
However, problems do arise when the real estate transaction fails, for whatever reason, and the