In real estate, both escrow and earnest money play vital roles in protecting parties during a transaction. Earnest money is a buyer’s deposit that shows serious intent and is typically applied to closing costs or the down payment. Escrow, on the other hand, refers to a neutral third party that holds funds or documents until all conditions of a sale are met. Together, they create a structured, transparent process that protects both buyer and seller from potential missteps or breaches.

This consumer guide by the National Association of REALTORS® demystifies how these components work, offering clarity on common questions—like what happens if a deal falls through or who decides how funds are disbursed. Especially in competitive markets, understanding the nuances of escrow and earnest money gives consumers greater confidence and helps them avoid surprises during the closing process.

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REFERENCE: 

National Association of REALTORS®. (2025, May 1). Consumer guide: Escrow and earnest money. https://www.nar.realtor/the-facts/consumer-guide-escrow-and-earnest-money