How Much Earnest Money Should You Offer?
The standard range is 1% to 3% of the purchase price, though competitive markets may push deposits to 5% or higher. On a $350,000 home, expect to deposit $3,500 to $10,500. A larger earnest money deposit signals stronger commitment to the seller, which can make your offer stand out in a multiple-offer situation. Your real estate agent can advise on local norms.
What Protects Your Earnest Money?
Contingencies in the purchase contract protect your deposit. Common contingencies include financing (you cannot get approved for the loan), home inspection (the property has significant defects), and appraisal (the home appraises below the offer price). If any contingency is not met, you can typically withdraw your offer and receive a full refund of your earnest money.
When Can You Lose Your Earnest Money?
You risk losing your deposit if you back out of the purchase after all contingencies have been waived or satisfied. Common scenarios include simply changing your mind, failing to meet contract deadlines, or being unable to close for reasons not covered by a contingency. The earnest money is held in escrow and released according to the terms both parties agreed to in the contract.
Frequently asked questions
Is earnest money the same as a down payment?
No, but earnest money is typically credited toward your down payment or closing costs at settlement. Your down payment is the full amount due at closing minus any credits. Earnest money is just the initial portion deposited when your offer is accepted.
Who holds the earnest money?
Earnest money is deposited into an escrow account held by a neutral third party — usually a title company, escrow company, or the seller's real estate brokerage. Neither the buyer nor seller has direct access until the transaction closes or is terminated.