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Earnest money is a good-faith deposit a buyer puts forward in a real estate transaction to demonstrate serious intent to purchase a property. When a purchase agreement is signed, the buyer will typically deposit a sum (often 1–5% of the purchase price, depending on market conditions) into an escrow account. This deposit signals to the seller that the buyer is committed, and it compensates the seller if the buyer unjustifiably backs out. Under the contract’s terms, the earnest money is usually applied toward the down payment or closing costs at closing. However, if the buyer breaches the contract (for example, walking away for a reason not covered by a contingency), the seller may be entitled to keep the earnest money as liquidated damages. For high-net-worth investors, especially those engaging in commercial or private real estate deals, earnest money can be substantial. It represents the investor’s skin in the game early in the deal process. On the Lightstone platform, earnest money deposits are handled with transparency: when Lightstone pursues an acquisition, it often puts up significant earnest money on its own balance sheet to secure the deal. This approach not only demonstrates confidence in the opportunity but also aligns interests – Lightstone is effectively investing alongside its investors from the outset. Such practices echo the brand’s values of trust and alignment, ensuring investors feel secure that the sponsor is equally committed to closing and executing the investment.
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