On This Page
Earnest money is one of those real-estate terms everyone acts like you were born knowing.
You weren't.
The easiest way to think about it is:
Money you deposit into the transaction according to the purchase agreement to demonstrate that you are serious about buying the property.
WHERE DOES THE MONEY GO?
The purchase agreement identifies the designated escrow holder and applicable deposit requirements.
The funds are generally held as part of the transaction rather than handed directly to the seller for spending money.
IS IT AN EXTRA FEE?
If the purchase closes, earnest money is generally accounted for in the buyer's closing figures according to the contract.
It is not simply an unrelated fee added on top of the purchase price.
HOW MUCH EARNEST MONEY DO I NEED?
There is no single required number Lisa wants permanently published because the amount can depend on:
- Property price
- Market conditions
- Offer strategy
- Seller expectations
- Negotiation
Lisa will discuss an amount appropriate for the specific offer.
DOES MORE EARNEST MONEY MAKE AN OFFER STRONGER?
Potentially.
A larger deposit can signal commitment.
But Lisa does not want you putting money at unnecessary risk solely to impress a seller without understanding the contract.
CAN I GET IT BACK?
Sometimes.
Whether earnest money is refundable depends on the purchase agreement and circumstances.
Relevant issues can include:
- Cancellation timing
- Due-diligence rights
- Financing provisions
- Appraisal provisions
- Other contractual conditions
This is why Lisa tracks deadlines obsessively.
See can I get earnest money back? for the cancellation picture.
DEPOSIT IT ON TIME
If the contract says the deposit is due by a particular deadline, follow it.
Do not treat contractual deadlines like suggestions.
