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When purchasing a property, buyers must show they are serious about closing the deal. This is where earnest money comes in. Earnest money is a deposit that buyers put down as a financial commitment, signaling to the seller that they intend to proceed with the purchase.
Earnest money is held in escrow by attorneys and serves as protection for the seller while the deal is finalized. Essentially, it takes the property off the market while both parties work toward closing.
In many parts of the country, buyers can get away with putting down as little as 1% of the purchase price as earnest money. But this is New York City, where the stakes—and the expectations—are much higher. Here, the standard deposit is typically 10% of the purchase price. Sellers rely on this amount to ensure that buyers are truly committed and not wasting valuable time.
So, I’ve been asked, “Cyn, what happens if a buyer backs out?” If buyers fail to close the deal without a valid reason, the seller may have the right to keep the earnest money as compensation for the time the property was off the market. However, certain contingencies—such as financing or inspection clauses—may allow buyers to get their deposit back under specific conditions. This is why carefully reviewing the contract before putting money down is essential.
Key Takeaways
• Earnest money is not just a deposit—it’s a serious commitment in real estate transactions.
• In New York City, the standard earnest money deposit is 10%, not 1%.
• If a buyer backs out without a valid reason, the seller may keep the deposit.
• Always review contract terms before putting money down to understand your rights and risks.
If you’re thinking about buying commercial properties in New York City, get expert guidance from me and my team at Virtuoso Realty Group. Check our website or send me a message on Instagram.