earnest money
Earnest money is the deposit a buyer pays to show a property seller they are serious, held until the sale completes or falls through.
In plain English
Bimpe stood in the estate agent's office in Lekki with her phone in one hand and her chequebook in the other, and the agent said the same thing he had said three times already, that the man from Ikoyi was also interested in the flat and would sign by Friday if she did not.
She had walked the flat twice, argued with the landlord's lawyer over the service charge, and told her mother about the balcony that faced the water. She was not ready to lose it to a stranger with a Friday deadline.
So she did what buyers all over Lagos do when they mean business. She paid a sum of money there and then, separate from the full purchase price, as a signal that she was not window shopping. That sum is earnest money, and it told the seller to take her flat off the market and stop entertaining the man from Ikoyi.
Earnest money is not the same as the deposit you pay before moving into a rented flat, and it is not the full price either. It sits in between, usually held by the lawyer or the agent handling the deal, and it gets swallowed into the final payment once everything closes properly.
If Bimpe backs out for no good reason, she may lose that money to the seller as compensation for the time wasted. But if the seller is the one who pulls out, or the sale collapses because of a problem with the title, a fair contract should see her money returned.
In the United Kingdom, the equivalent shows up as a reservation fee when buying a new build, paid to hold a unit while paperwork is sorted. Same spirit, different address.
A flat in Lekki is priced at ₦85,000,000. The buyer pays ₦3,000,000 as earnest money to hold the property while contracts are prepared, and this amount is later deducted from the ₦85,000,000 balance due at completion.
Questions people ask
Is earnest money the same as a deposit?
Not quite. A deposit, like the one you pay before moving into a rented flat, is usually held against damage and returned at the end of the tenancy. Earnest money is paid during a purchase to hold a property and reduce the risk of the seller walking away, and it eventually forms part of the purchase price rather than being refunded separately.
Can I lose my earnest money?
Yes, if you pull out of the deal without a valid reason covered in the contract, the seller can keep it as compensation. This is why you should never hand over earnest money on a verbal promise. Get a written agreement first that spells out exactly when it is refundable and when it is not.
Who holds the earnest money during the sale?
Ideally, someone neutral, such as a lawyer, a licensed agent, or an escrow arrangement, rather than the seller personally. This protects both sides and avoids the awkward situation of asking a seller to return money they have already spent.
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