Buying a home involves more than just making an offer — it also means putting some money on the line to show you’re serious. That’s where earnest money comes in.
If you’re new to the home buying process, this term can sound confusing. Don’t worry — I’ve got you covered.
💰 What Is Earnest Money?
Earnest money is a deposit made by the buyer to show good faith in a real estate transaction. It's typically submitted alongside an offer on a property and is held in escrow until closing.
Think of it as a sign that you’re committed to the purchase.
📊 How Much Is Earnest Money?
The amount varies depending on the market, location, and price of the home — but a common range is:
1% to 3% of the home’s purchase price
In competitive markets, some buyers offer 5% or more to stand out
🏦 Where Does the Earnest Money Go?
The money is held in an escrow account, not by the buyer or seller. When the deal goes through, the deposit is usually applied to:
Your down payment, or
Closing costs
⚠️ Is Earnest Money Refundable?
It depends on your contract contingencies. You can usually get it back if:
The home inspection reveals serious issues and you decide to walk
You’re unable to get financing
The appraisal comes in too low, and a new agreement can’t be reached
However, if you back out of the deal for no valid reason, the seller may be entitled to keep your earnest money.
🆚 Earnest Money vs. Down Payment
A common question:
💡 Earnest Money = upfront deposit to secure the contract
💡 Down Payment = larger payment due at closing to secure the mortgage
Both are part of your investment, but they serve different purposes.
🧠 Pro Tip for Buyers:
Always work with a real estate agent who can help you negotiate contingencies in your contract that protect your earnest money. Don’t skip this step!
📣 Ready to Buy a Home With Confidence?
If you're starting your home buying journey and want to make smart, informed decisions, I’m here to guide you from start to close.
📲 DM me to schedule a free buyer consultation
📞647 560 9377
📧[email protected]
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