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Real Estate FAQ | What is an earnest money deposit good for?

Real Estate FAQ | What is an earnest money deposit good for?

What is an earnest money deposit good for is a real estate FAQ or a frequently asked question in Costa Rica real estate.

The earnest money deposit is really like a handshake when agreeing on the property purchase between buyer and seller. But the earnest money deposit needs to be accompanied by a formal agreement.

When there is any type of financing involved in a real estate, the lender will request a formal agreement. To seal the agreement, you need an earnest money deposit. Without it, either party could walk away from the deal without any penalty.

Have you fallen in love with a property and you want to buy it? Then take it off the market. You can only do this by making an earnest money deposit. The following steps need to be taken:


Before you formalize an offer, hire your own attorney to do a thorough title check. If there are any doubts or issues, make your offer subject to clear up those issues.


Once the buyer and seller agree on the sales price and other conditions, an offer should be formalized. This can be done by writing up a formal agreement. This agreement can have different names

  • Option to purchase sale agreement
  • Buy – Sell agreement
  • Property purchase agreement
  • Purchase option

The option

In the option to purchase – sale agreement you want to put all the conditions that your agreement is subject to. The option will also have to say what is done with the earnest money deposit. Also important is to make clear what will happen to the earnest money deposit if either party does not close.


In Costa Rica, local buyers hand over the earnest money deposit to the buyer. Often only in return for a receipt. But there are smarter ways to do this.

A third party can hold the earnest money. In case of non-compliance by either party, the earnest money is safe. The best third party for this matter is an escrow company.

Earnest money release

The earnest money deposit is part of the purchase price and should be released to the seller unless one of the parties defaults the agreement.

This is a collection of Costa Rica real estate FAQ – frequently asked questions that I have put together to help you in buying or selling a home. Do you have any other questions that are not listed in our FAQ blog? Then feel free to leave them in the comment section below or send me a request. You can also subscribe to our FREE weekly newsletter, The Easy Times, below.

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Ivo Henfling

Ivo Henfling started the American European Real Estate Network Costa Rica in 1996 and has grown it into the largest Costa Rica MLS with thousands of up to date property listings for sale and for rent. Ivo has written hundreds of articles about real estate and living in Costa Rica for The Tico Times and other online informational sites.

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