Here is a list of common questions real estate agents ask their broker about the Earnest Money Deposit (EMD), along with brief explanations to help agents better understand the process and legal responsibilities:

EMD = Earnest Money Deposit = Buyer’s good faith deposit to show serious intent to purchase a property.

🔐 General Purpose & Timing

  1. What is the purpose of the EMD?
    To show the buyer’s serious intent to purchase the property. It also gives the seller confidence that the buyer is committed to the transaction.
  2. When is the EMD due after contract acceptance?
    Typically within 3 business days after offer acceptance (per default terms in the CAR Residential Purchase Agreement).
  3. Can the EMD be delivered later than 3 days?
    Yes — but only if both parties agree to modified terms in the contract.

🏦 Handling and Deposit Process

  1. Who holds the EMD?
    Usually the escrow company — but in some cases, a brokerage may temporarily hold the deposit until escrow is opened.
  2. Can the agent hold the EMD check?
    No. A licensed agent must not hold EMD funds personally. They must be delivered to the broker or escrow in a timely manner.
  3. How should the EMD be paid?
    By wire transfer, cashier’s check, or personal check (based on escrow instructions). Wires are most common and considered more secure.

📜 Compliance & Documentation

  1. Do I need to get a receipt or proof of EMD delivery?
    Yes. Always get a copy of the deposit receipt or wire confirmation and keep it in the transaction file.
  2. What happens if the buyer doesn’t deliver the EMD on time?
    The buyer is in breach of contract, and the seller may issue a Notice to Perform giving the buyer 2 days to cure the breach or risk cancellation.
  3. Are there any DRE rules about how soon the EMD must be deposited?
    Yes. If the brokerage receives the EMD directly, it must be deposited into escrow or a trust account within 3 business days per California DRE regulations.

⚖️ Legal Issues & Disputes

  1. Can the buyer get the EMD back if they cancel the contract?
    Yes — if they cancel within the contingency period (e.g., inspection, appraisal, or loan contingency). After contingency removal, it gets more complicated.
  2. What happens if there’s a dispute over the EMD?
    The EMD is held in escrow until both parties mutually agree in writing to release the funds or until a court or arbitration decision is made.
  3. Can the broker release the EMD to the buyer or seller?
    No. Only escrow can release funds — and only with written instruction signed by both parties or a legal order.

🛡️ Broker Policies & Best Practices

  1. Does our brokerage have an internal policy about handling EMDs?
    Agents should ask their broker about internal procedures, especially if they ever receive a physical check.
  2. What should I do if I receive an EMD check by mistake?
    Immediately notify your broker and deliver it to escrow or the broker’s trust account — never deposit into your personal or business account.
  3. Can I put “Receipt of EMD” in my agent remarks or emails?
    Only if you have verifiable proof (e.g., wire confirmation or escrow receipt). Avoid making legal representations without documentation.