What is necessary to establish an earnest money contract?

To establish an earnest money contract, mutual agreement on all terms is fundamental. This means that both parties—the buyer and the seller—must come to a consensus on the conditions of the sale. This includes the purchase price, financing arrangements, contingencies, and other significant aspects that define the agreement. Without this mutual agreement, there is no binding contract, rendering the earnest money meaningless, as there would be no clear terms to enforce.

While a formal written agreement is often advisable to document the terms clearly, an oral agreement can also theoretically be binding, provided mutual consent is established. Commitment to a closing date and the initial deposit amount are certainly important components of the transaction but are not essential for the formation of the earnest money contract itself. The core requirement is that both parties agree on the terms of the deal, which solidifies the foundation of their contract.