Real Estate Closing FAQs

Who holds the earnest money in a FSBO transaction?

In a for sale by owner (FSBO) transaction, the earnest money can either be held by the seller or by a third-party (Attorney or title company) depending upon the terms of the purchase agreement. Most agreements provide that if a transaction closes, the earnest money deposit is credited to the buyer towards the purchase price.

Depending upon the terms of the purchase agreement, the earnest money may be refunded to the buyer if certain obligations of the seller are not met, or it may be forfeited to the seller if certain contingencies or obligations by the buyer are not satisfied. It is important for the buyers and sellers of (FSBO) transactions to have a clear understanding of the terms and conditions for holding earnest money deposits prior to closing. This will ensure that both parties are protected during the transaction and that all funds are used appropriately for closing costs.