What Is Earnest Money in NYC Real Estate? Understanding Your Contract Deposit

When buying a home in New York City, you'll likely hear about the contract deposit, sometimes referred to as earnest money. But what exactly is it, and how does it work?

In a typical NYC residential transaction, buyers are often expected to submit a deposit of around 10% of the purchase price when signing the contract. This payment demonstrates the buyer's commitment to moving forward with the purchase.

The deposit is generally held in an escrow account by the seller's attorney until closing. It's not an additional fee on top of the purchase price. Instead, it is credited toward the total amount the buyer owes at closing.

However, buyers should understand that the deposit comes with certain risks. If a buyer backs out of a signed contract without a valid contractual reason, they could potentially lose their deposit. This is why having an experienced real estate attorney review the agreement before signing is so important.

The amount and terms can vary depending on the property, transaction, and negotiated contract provisions. New development purchases may also have different deposit structures.

Before committing to a purchase, make sure you understand when the deposit is due, where it will be held, and under what circumstances it may be refundable.

If you're preparing to purchase a home in NYC and have questions about the contract process, reach out to us. We're happy to help you understand what to expect and connect you with the right professionals.