Think of earnest money as a good faith deposit. It’s usually 1% to 2% of the purchase price, and it tells the seller:
You’re committed You’re not making multiple offers just to test the market You’re willing to follow through if everything checks outThe funds are submitted shortly after your offer is accepted and held safely in an escrow account.
Earnest money isn’t extra—it’s applied to your final costs at closing. That means:
If you’re putting 5% down, and you already gave 2% in earnest money, you’ll just need to bring the remaining 3%
The money is managed by a neutral third party—usually a title company or escrow officer—until the deal is completeIt’s simply money you’re paying early to show commitment.
If something goes wrong—and it’s covered by a contingency in your contract—you can typically get your earnest money refunded. That includes:
A failed home inspection
Loan approval falling through
A low appraisalBut if you back out for a reason not covered in your contract, you could forfeit the deposit. That’s why it’s critical to work with an agent and lender who help you write smart, protective contracts.
Download our free “Offer Strategy Guide” — includes earnest money tips, negotiation tools, and contingency checklists
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