Your comprehensive guide to earnest money deposits - what they are, why they matter, and how to protect your investment
Earnest money, also known as a good faith deposit, is a sum of money buyers put down to demonstrate their serious intention to purchase a property. This deposit is typically held in an escrow account and will be applied to the down payment at closing.
Earnest money protects both buyers and sellers by creating a financial commitment to the transaction while maintaining safety through escrow.
Once your offer is accepted, earnest money should be deposited within 1-3 business days
Funds are held in an escrow account managed by a neutral third party
Money remains in escrow during inspections, appraisal, and financing process
Earnest money is applied to your down payment at closing
You can get your earnest money back if:
The typical earnest money deposit ranges from 1-3% of the purchase price. In competitive markets, a larger deposit might make your offer more attractive. Use our calculator above to determine an appropriate amount for your situation.
Earnest money is typically held in an escrow account managed by a neutral third party, such as:
In a buyer's market, earnest money deposits typically range from 1-2% as sellers are more flexible with terms.
In competitive markets, earnest money deposits often range from 2-3% or higher to strengthen offers.
*This information is for educational purposes only and should not be considered legal advice. Consult with a real estate attorney for specific legal guidance.