When you make an offer on a home, you will likely hear the term “earnest money.”
This is an important part of the homebuying process that shows the seller you are serious about purchasing the property.
What Is Earnest Money?
Earnest money is a good-faith deposit the buyer submits after an offer is accepted.
It is typically held in a secure escrow account until the transaction is completed.
This deposit helps demonstrate commitment and gives the seller confidence that the buyer intends to move forward with the purchase.
How Much Is Earnest Money?
The amount can vary depending on market conditions and price range, but it is commonly around 1% to 3% of the purchase price.
For example:
A $400,000 home may require approximately $4,000 to $12,000 in earnest money.
Is Earnest Money Refundable?
In many cases, yes — earnest money can be refundable.
Buyers may be able to recover their deposit if they cancel the transaction under specific contract contingencies, such as:
- Inspection issues
- Financing denial
- Appraisal problems
- Title concerns
However, if a buyer backs out without a valid contractual reason, they may risk losing the deposit.
The Bottom Line
Earnest money protects both parties and helps move the transaction forward with confidence.
Understanding the timelines and contingencies is key to protecting your funds.