What Is Earnest Money in Real Estate

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What Is Earnest Money in Real Estate

1. Earnest Money Shows You’re Serious

When you make an offer on a home, you’ll typically include earnest money—a deposit that tells the seller, “I’m committed.” It’s usually 1% to 2% of the purchase price, and it’s paid shortly after your offer is accepted. Think of it as a good faith gesture that says, “I’m not just kicking tires—I’m ready to buy.”

2. It Gets Applied to Your Final Costs

The earnest money doesn’t disappear—it’s held in an escrow account until closing. When the deal goes through, it gets applied toward your down payment or closing costs. So in the end, it’s still your money—it’s just paid up front to keep everything on track.

3. You Can Get It Back (But There Are Rules)

If something major comes up—like a failed home inspection or loan issue—you can usually back out and get your earnest money refunded, as long as the reason falls within your contract terms. But if you simply change your mind or walk away for no reason, the seller may keep the deposit. That’s why it’s important to understand your contingencies and work with a trusted mortgage advisor and real estate agent who’s looking out for you.

Want to Know Exactly How Much Earnest Money You’ll Need?

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