To write an earnest money deposit, include the parties involved, deposit amount, purpose, refund conditions, and dispute resolution steps in a legally binding written agreement. Specify the deposit’s application to the purchase price, late fees, or penalties for cancellation. Use standardized templates or consult a real estate attorney to ensure compliance with local laws.

The importance of a well-drafted earnest money deposit lies in mitigating financial disputes and ensuring transactional clarity. According to the National Association of Realtors (NAR), 5-10% of real estate transactions involve earnest money disputes, often due to ambiguous terms. For example, unclear refund conditions can lead to legal battles, costing parties an average of $15,000 in litigation fees, as reported by the American Bar Association (ABA). A structured agreement reduces risk by defining cancellation triggers, such as inspection failures or financing issues, which account for 60% of disputes, per a 2022 study by the National Association of Home Builders (NAHB). Additionally, specifying the deposit’s hold period (typically 30-45 days) aligns with state regulations, preventing premature withdrawal. The ABA emphasizes that 75% of successful cases involve contracts with precise refund language. Thus, meticulous drafting saves time, money, and legal exposure, ensuring both buyer and seller confidence.

Total words: 248