When purchasing real estate, the buyer sometimes gives money to the seller when they are executing a purchase contract. This is called a deposit. It can also be referred to as earnest money. The money is a way for the buyer to communicate to the seller that they are serious about the purchase and are willing to negotiate on the contract. If the seller backs out of the deal, the buyer typically keeps the deposit unless the contract states otherwise. The amount of the deposit will vary from contract to contract. It can be as little a one dollar up to a considerable percentage of the total purchase price. The typical amount is between 1% and 3% of the purchase price. The laws that govern deposits vary from state to state. Once the contract is agreed on by both parties, the deposit will be applied to the buyer's closing costs of the loan.