How is the amount of earnest money determined in a contract for the sale of real property?

The amount of earnest money in a contract for the sale of real property is primarily determined by the agreements of the parties involved in the transaction. This is a reflection of the negotiations and terms that the buyer and seller establish based on their mutual understanding and objectives. Earnest money serves as a demonstration of the buyer's good faith in pursuing the purchase and can vary widely depending on the specifics of the deal, including market conditions, property type, and the level of interest from buyers.

While the seller's asking price can influence the expected earnest money, it is not the sole determinant. Additionally, standard industry practices provide customary ranges but do not enforce strict amounts, allowing flexibility based on individual agreements. The buyer's financial ability might impact their willingness to put down a larger earnest deposit, but again, the final decision rests with what both parties negotiate and agree upon. Therefore, the most accurate determinant is indeed the agreements made by the parties.