Amount
1-3% of purchase price (typical)
Hot markets sometimes see 5%+. Cold markets accept $1-2K flat. Larger deposits signal stronger commitment to the seller and can move a split-decision. Don't deposit more than you'd accept losing.
Earnest Money · the seriousness deposit
Skin in the game.
With an exit strategy.
Earnest money is the deposit you put down when an offer is accepted — typically 1-3% of purchase price. It's refundable via contract contingencies. Knowing how to size it, protect it, and recover it is core homebuying competence.
· How earnest money works
Four facts.
All matter.
Where it sits
Held in escrow by a neutral third party
Usually the title company or seller's broker. Held in a non-interest-bearing trust account. Released to seller at close (becomes part of your down payment) or returned to you if the deal dies via valid contingency.
When it's at risk
When you breach contract without contingency
If you walk after contingencies expire — for any reason — the seller may keep the earnest money as compensation for time off market. Get out via contingency, not 'cold feet.'
How to recover
Use the contingency the contract gave you
Inspection contingency, financing contingency, appraisal contingency — each is an exit. Notify in writing within the contingency window. The escrow holder releases your funds back.
· Watch-outs
Four traps
with earnest money.
Pitfall 01
Wiring directly to the seller.
NEVER. Always to the escrow holder (title company/broker). Confirm wire instructions BY PHONE — wire fraud on earnest money is a major scam vector.
Pitfall 02
Waiving inspection without reserves.
Inspection contingency is your biggest earnest-money safety valve. Waive only if you can absorb $15K+ in surprise repairs. Otherwise you're locking in the earnest money against unknown risk.
Pitfall 03
Missing the contingency window.
Most contingencies have specific day counts (e.g. 'inspection within 7 days of acceptance'). Miss the window = lose the right. Calendar everything at acceptance.
Pitfall 04
Confusing earnest money with down payment.
Earnest money becomes PART of your down payment at close — not in addition to. Your $5K earnest is credited against your $20K down. Same money.
Earnest money is leverage.
Used right.
Talk to a vetted realtor + LO before sizing your earnest money. The right number depends on your market and your reserves.