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By: James Van Winkle, NVAR Legal Counsel
Earnest Money Deposit (EMD)
1) What is it?
The Nevada Law and Reference Guide (Fourth Edition, 2014) says “Earnest money is
not consideration - it is an inducement to negotiate. Earnest money is presented with an
offer to indicate the genuineness of the offer.”
2) If the buyer is turned down for a loan does the buyer get his earnest money back?
Generally, yes. If the buyer has fully complied and done everything within his power to
obtain the loan but still doesn’t qualify, he would be entitled to his EMD back.
3) If the buyer cancels during the Due Diligence period, is he entitled to his EMD back?
Yes. If the buyer finds something adverse in the property inspection, he is generally
entitled to cancel the agreement and have his EMD returned.
4) If the buyer defaults prior to the close of escrow (COE), is the EMD refunded?
Baring unusual circumstances, the buyer’s cancellation for no reason prior to the COE
would allow the sellers to properly retain the EMD.
5) What should be done if there is a dispute about who is entitled to the EMD?
The first step would be mediation. Most standard purchase agreements have a mediation
clause to allow the parties to resolve their differences. Your local association has a
mediation program available for disputes regarding earnest money.
December 2015
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purposes only. NVAR’s staff attorneys provide general legal information, not legal representation or advice regarding your real estate
related questions. No attorney-client relationship is created by your use of the Legal Information Line and any information you receive
you should not act upon this information without seeking independent legal counsel. Information given over the Legal Information Line
or in these articles is for your benefit only. Do not practice law! Inform your clients they must seek their own legal advice.
August, 2017
