When you make an Offer to Purchase a home in Massachusetts, a deposit—often called an earnest money deposit—shows the seller that you are serious about buying the property.
The deposit serves several important purposes:
Shows good faith. You are putting money behind your offer, which can make the seller more comfortable accepting it.
Strengthens your offer. When sellers are comparing similar offers, the size and structure of the deposits may be one factor they consider.
Becomes part of your purchase funds. If the transaction closes, the deposit is generally credited toward the amount you owe at closing; it is not normally an additional cost on top of the purchase price.
Provides security to the seller. Depending on the contract terms and circumstances, a buyer who defaults after contingencies have expired or been waived could potentially put their deposit at risk.
In Massachusetts
A transaction commonly involves an initial deposit with the Offer to Purchase, followed by a larger deposit when the Purchase and Sale Agreement (P&S) is signed. The exact amounts are negotiable and can vary considerably.
For example, on a $600,000 home, a buyer might provide $1,000 with the offer and then an additional agreed-upon amount when signing the P&S. Those funds are typically held in escrow and ultimately credited toward the buyer's purchase at closing.
Importantly, giving a deposit does not automatically mean the seller gets to keep it if the transaction doesn't close. Whether the buyer is entitled to the deposit back depends on the contract language and the reason the transaction terminated—for example, a properly exercised inspection, financing, or other contingency.
Because Massachusetts real estate contracts can create significant legal rights regarding deposits, buyers should pay close attention to the deposit, contingency, default, and refund provisions in both the offer and P&S and consult their attorney about their particular transaction.