When you make an offer on a home, your agent will ask for a check to accompany it (checks are the same as cash, and the deposit is typically 1% to 2% of the purchase price).  Earnest money is made in good faith to demonstrate – to the seller – that the buyer’s offer is genuine. Earnest money essentially takes the home off the market to anyone else and reserves it for you.
 
The check (or sometimes cash) is deposited in a trust or escrow account for safekeeping. If a deal is struck, the earnest money is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer.
 
Important: if the terms of a deal are agreed upon by both parties, but then the buyer backs out, the earnest money may not be returned to the buyer. Ask your agent about the ways to protect your earnest money deposit and the ways to protect it – such as offer contingencies.