An earnest money deposit (EMD) is the money that a Buyer puts down to demonstrate their “good faith” or seriousness about buying a particular home. If the Buyer defaults on or cancels the contract, this EMD serves as liquidated damages, in part to compensate the Seller for the time, expense, and effort expended on that transaction and/or required to secure new buyers. Shortly after the contract to buy/sell a particular property is entered into, the EMD is paid to a third party (“Escrow Agent”), typically the title company handling the closing.