“What Every Buyer Should Know About Earnest Money Deposits”

If you’re preparing to buy a home, you’ll likely hear about something called an earnest money deposit. It’s one of the most important steps in showing a seller you’re serious about your offer—but it can also be confusing for first-time buyers. Here’s a breakdown of what earnest money is, how it works, and what you should know before writing that check.

What Is Earnest Money?

Earnest money is a good faith deposit that buyers include with their offer to purchase a home. It tells the seller: “I’m serious about buying your property, and I’m willing to put some money on the line.”

• Typically ranges from 1% to 3% of the purchase price (though this can vary by market).

• Paid after your offer is accepted and held in an escrow account until closing.

• Credited toward your down payment or closing costs once the deal closes.

Why Sellers Require It

From the seller’s perspective, earnest money adds security. It shows that a buyer isn’t likely to walk away without good reason. In a competitive market, a strong earnest money deposit can make your offer stand out.

When You Can Get It Back

The good news: earnest money is usually refundable under certain conditions. Common reasons you’d get it back include:

• The home doesn’t pass inspection and you withdraw within your contingency period.

• The appraisal comes in significantly lower than the purchase price.

• You’re unable to secure financing despite being pre-approved.

When You Could Lose It

On the flip side, you may forfeit your deposit if you:

• Walk away from the purchase for personal reasons outside your contingencies.

• Miss critical deadlines outlined in your contract.

• Change your mind after the seller has taken their home off the market for you.

Tips for Buyers

1. Understand the contract: Know exactly what contingencies protect your deposit.

2. Offer more in hot markets: A higher earnest deposit can strengthen your offer against competitors.

3. Don’t overextend: Only commit what you can comfortably afford to risk if things don’t work out.

4. Work with a trusted agent: They’ll guide you through the terms and ensure your deposit is handled properly.

✅ Bottom Line:Earnest money deposits play a key role in building trust between buyers and sellers. By understanding how they work—and what protects your deposit—you can make a confident offer without unnecessary risk.