The terms earnest money and earnest payment denote a down payment paid towards the purchase of property (typically real estate) when the purchase agreement is signed. This deposit indicates that the buyer is serious about following through on the purchase. If the sale is made in keeping with the purchase agreement, the earnest money deposited will normally be applied towards the cost of the purchase.
If a prospective buyer chooses not to follow through on the purchase or if seller chooses not to sell the property, the earnest money is normally returned to the depositor. Depending on the terms and conditions of an earnest money agreement, the seller may be required to pay the buyer a markup on their earnest money if the seller withdraws from the agreement. Typically, the seller must repay double the earnest money deposited by the buyer if they decide not to sell the property after signing the sales agreement. It is also possible for a buyer to lose part or all of their earnest money should they withdraw from the contract, if this is stipulated by the terms of the agreement.
The practice of taking earnest money as a guarantee that a buyer will follow through on a purchase is also common in Switzerland – particularly among real estate agents. If buyers choose not to follow through on a purchase, they have the right to claim a refund of their earnest money deposit.
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