Earnest Money: How Much and When You Get It Back
Earnest money is a good-faith deposit that proves you are serious. It is refundable more often than buyers think — and forfeitable in ways they do not expect.
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Earnest money is a deposit you place with a neutral third party — usually a title company, escrow company, or attorney — when your offer is accepted. It is not a fee. If you close, it is credited toward your down payment and closing costs.
How much is typical
One to three percent of the purchase price is the common range, though local convention varies widely, and in competitive markets buyers sometimes offer five percent or more to signal commitment. On a $400,000 home, that is $4,000 to $12,000.
When you get it back
- You cancel within the inspection contingency window
- Your financing is denied and you cancel within the financing contingency
- The appraisal comes in below contract price and you cancel under the appraisal contingency
- Title cannot be delivered clear
- The seller breaches the contract or fails to complete agreed repairs
When you lose it
- You cancel after all contingencies have expired, for any reason
- You miss a contract deadline and the seller issues a valid notice to perform
- You change your financing in a way that causes the loan to fail after the contingency has passed
- You simply decide not to buy — remorse is not a contingency
Disputes
If buyer and seller disagree about who gets the deposit, escrow will not release it to either party without mutual written instructions or a court order. Deposits have sat in escrow for months over a few thousand dollars. Meeting deadlines in writing is the cheapest insurance against that outcome.
Frequently asked questions
Is earnest money the same as a down payment?
No. Earnest money is a deposit made at contract; the down payment is paid at closing. Earnest money is credited toward what you owe at closing.
Does more earnest money make my offer stronger?
It can. A larger deposit signals that you expect to close, because you have more at risk. It does not change the price.
Editorial note. This article is educational and is not legal advice. Real estate contracts, disclosure requirements, and landlord-tenant rules differ by state and locality. Consult a licensed attorney about your situation.
