# What Is Earnest Money and How Much Should You Offer? By Opendoor Editorial Team | 2022-02-18 > Earnest money is a deposit that typically ranges from 1%-2% of the total home purchase price, and is used to ensure the seller knows you are ready to move forward if your offer is accepted. ## Key Takeaways #### Key Takeaways - You may be able to get a refund of your earnest money in some circumstances. - Make sure you have refund details in your contract; if not, you may need to add them, or you may not be refunded the full amount. - Many things could trigger a refund, but the main things to be aware of are contingencies, home inspection problems, and failure to get title insurance. - If you randomly choose to change your mind on a home, the seller could hold onto it as compensation for their time. - Make sure you really want the home. It may sound redundant and obvious, but going back and forth with these decisions can have great financial consequences. # What Is Earnest Money and How Much Should You Offer? Earnest money is a deposit you make when your offer on a home is accepted — a way of telling the seller you're committed to following through. It typically ranges from 1% to 3% of the purchase price and sits in an escrow account until closing day. This guide covers how much to offer, when it's due, how to protect your deposit, and what happens if the deal falls through. [Get your offer](#) ## What is earnest money in real estate Earnest money is a good-faith deposit that a homebuyer pays to a seller after both parties sign a purchase contract. The deposit typically ranges from 1% to 3% of the home's purchase price, and it's held in an escrow account until the deal closes. If the buyer backs out without a valid reason outlined in the contract, the seller usually keeps the deposit as compensation for taking the home off the market. You might hear earnest money called an "earnest money deposit," "EMD," or simply a "good-faith deposit." The name varies, but the idea stays the same: it's money that shows you're serious about buying. Here's what earnest money does: - **Signals commitment:** It tells the seller you're willing to put real money behind your offer. - **Secures the home:** It gives the seller confidence to stop showing the property to other buyers. - **Protects the seller:** It compensates the seller if you walk away for a reason not covered in your contract. ## Why earnest money matters when buying a house When a seller accepts your offer, they're making a bet on you. They take their home off the market, stop entertaining other offers, and start the closing process. All of that takes time. Without earnest money, a buyer could walk away at any point, and the seller would have nothing to show for weeks of waiting. Earnest money changes that dynamic. It creates accountability. For buyers, it means having skin in the game. For sellers, it means knowing the buyer has something to lose if the deal falls apart. Both sides benefit from that shared commitment. ## How much earnest money to offer There's no single answer here. The right amount depends on where you're buying, what the market looks like, and what the seller expects. ### Market conditions and competition In a hot market with multiple offers on the same home, a larger earnest money deposit—sometimes [as high as 10%](https://www.zillow.com/learn/earnest-money-vs-down-payment/)—can help [your offer stand out](https://www.opendoor.com/articles/how-to-choose-the-best-offer-on-your-house). It signals financial readiness and serious intent. In a slower market, a standard deposit is often enough. Sellers in those situations are typically more focused on finding any qualified buyer than on the size of the deposit. ### Home price and location Earnest money usually scales with the price of the home. A $300,000 home will likely call for a smaller deposit than a $600,000 home. Local customs also matter. What's considered normal in one city might seem low or high in another, so it helps to ask your real estate agent what's typical in your area. ### Seller expectations and preferences Some sellers feel more comfortable with a higher deposit, especially if they've had deals fall through before. Others are more flexible. Your agent can often get a sense of what a particular seller is looking for and help you tailor your offer accordingly. ## When is earnest money due Earnest money is typically due [within three days](https://www.zillow.com/learn/earnest-money-deposits/) after [the seller accepts your offer](https://www.opendoor.com/articles/what-happens-after-house-offer-is-accepted) and both parties sign the purchase contract. The exact deadline is spelled out in the contract, so it's worth reading that section carefully. Missing the deadline can create problems. At best, it might make the seller nervous. At worst, it could give them grounds to cancel the contract and move on to another buyer. ## Where does your earnest money deposit go Your earnest money doesn't go directly to the seller. Instead, it's held in an [escrow account](https://www.opendoor.com/articles/what-is-escrow), which is a secure holding account managed by a neutral third party. That third party is usually a title company, escrow company, or real estate brokerage. ## What happens to earnest money at closing When the [sale closes](https://www.opendoor.com/articles/how-long-does-closing-take), your earnest money is credited toward your purchase. Most buyers apply it to their down payment or closing costs. It's not an extra fee on top of what you already owe. For example, if you put down $6,000 in earnest money and your total down payment is $25,000, you'd bring $19,000 to closing. The earnest money you already deposited covers the rest. ## Is earnest money refundable Yes, but only under certain conditions. Your purchase contract will include clauses called "contingencies" that allow you to back out and get your deposit back if specific requirements aren't met. If you walk away for a [reason not covered by a contingency](https://www.opendoor.com/articles/why-do-pending-home-sales-fall-through), the seller typically keeps your earnest money. That's why it's so important to understand what your contract says before you sign. ## Contingencies that protect your earnest deposit A contingency is a condition written into your contract that allows you to exit the deal without losing your deposit. If the condition isn't satisfied, you can walk away and get your money back. ### Home inspection contingency A home inspection contingency lets you hire a professional inspector to examine the property. If the inspection uncovers major problems, like foundation issues, roof damage, or mold, you can renegotiate with the seller or cancel the contract entirely. ### Appraisal contingency Mortgage lenders require an appraisal to confirm the home's value before approving a loan. If the appraisal comes in lower than your offer price, an appraisal contingency lets you renegotiate or back out without losing your deposit. ### Financing contingency Most buyers rely on a mortgage to purchase a home. A financing contingency protects you if your loan application is denied. Without it, you could lose your earnest money even if the bank says no. ### Home sale contingency If you're buying a new home before selling your current one, a home sale contingency gives you an out if your existing home doesn't sell in time. Nearly [45% of buyers](https://www.homelight.com/blog/how-to-buy-house-contingent-on-selling-yours/) use proceeds from their previous home sale as a down payment, making this contingency important for many transactions. Some buyers avoid this contingency altogether by selling to a cash buyer first, which can make their offer more attractive to sellers. ## Should you waive contingencies to strengthen your offer In competitive markets, some buyers consider waiving contingencies to make their offer more appealing. It can work, but it comes with real risk. Waiving an inspection contingency, for instance, means you could end up buying a home with expensive hidden problems. Waiving a financing contingency means losing your deposit if your loan falls through. Before removing any protections, it's worth weighing the potential cost against the potential benefit. ## How to protect your earnest money deposit A few simple steps can help keep your deposit safe throughout the buying process. ### 1. Use an escrow account Never hand earnest money directly to a seller. Always work with a licensed, neutral third party who will hold the funds in escrow until closing. ### 2. Understand your contingencies Know exactly which contingencies are in your contract and what each one protects. If any language is unclear, ask your agent or attorney to walk you through it. ### 3. Meet all deadlines Contingencies often come with deadlines for inspections, appraisals, or financing approval. Missing a deadline can void your protections and put your deposit at risk. ### 4. Get everything in writing Verbal agreements don't hold up in real estate. Make sure all terms, changes, and agreements are documented in your contract. ## Earnest money vs. down payment First-time buyers often confuse earnest money with a down payment. They're related, but they serve different purposes and come at different times. | | **Earnest money** | **Down payment** | | **When it's paid** | At contract signing | At closing | | **Purpose** | Shows good faith and secures the contract | Reduces loan amount and builds equity | | **Typical amount** | Smaller percentage of home price | Larger percentage of home price | | **Where it goes** | Held in escrow, then applied to closing costs or down payment | Paid directly toward the home purchase | Think of earnest money as a commitment fee that eventually becomes part of your [down payment](https://www.opendoor.com/articles/down-payment-amount) or closing costs. ## Move forward with confidence on your next offer Knowing how earnest money works puts you in a stronger position when it's time to make an offer. You'll understand what's expected, how to protect yourself, and how to present yourself as a serious buyer. If you're selling a home before buying your next one, the process can feel more complicated. Getting a cash offer upfront can simplify things. You'll know exactly what your current home is worth and can move forward without the uncertainty of a home sale contingency. [Get a cash offer from Opendoor](https://www.opendoor.com/address-entry) and see how much simpler your next move could be. [Get your offer](#) ## FAQs about earnest money ### How much is earnest money on a $400,000 house? The amount varies by market and seller expectations. On a $400,000 home, buyers typically pay somewhere between $4,000 and $12,000. Local customs and market conditions can push that number higher or lower. ### Who keeps earnest money if a deal falls through? It depends on why the deal fell through. If you exit under a valid contingency, like a failed inspection or denied financing, you typically get your deposit back. If you back out for a reason not covered by a contingency, the seller usually keeps the funds. ### Can you negotiate earnest money after making an offer? Yes. Earnest money can be negotiated as part of the overall offer terms. If circumstances change after the initial offer, you and the seller can agree to adjust the amount through a contract amendment. ### Is earnest money required to buy a house? It's not legally required, but it's standard practice in most real estate transactions. Sellers generally expect an earnest money deposit as part of any serious offer. Without one, your offer may not be taken seriously. | **Supported Locations** | | | **Cities / Areas** | **States** | | [Columbia](/sell/columbia_sc), [Columbus](/sell/columbus_oh), [Corpus Christi](/sell/corpus_christi_tx), [Detroit](/sell/detroit_mi), [East Texas](/sell/east_texas), [El Paso](/sell/el_paso), [Florida Panhandle](/sell/florida_panhandle), [Greensboro](/sell/greensboro_nc), [Greenville](/sell/greenville_sc), [Indianapolis](/sell/indianapolis_in), [Kansas City](/sell/kansas_city), [Killeen](/sell/killeen_tx), [Knoxville](/sell/knoxville_tn), [Las Vegas](/sell/las_vegas), [Little Rock](/sell/little_rock_ar), [Louisville](/sell/louisville_in_ky), [Memphis](/sell/memphis_tn), [Miami](/sell/miami_fl), [Milwaukee-Waukesha](/sell/milwaukee_waukesha_wi), [Minneapolis](/sell/minneapolis), [New Orleans](/sell/new_orleans_la), [New York & New Jersey](/sell/new_york_new_jersey), [Northern Colorado](/sell/northern_colorado), [Oklahoma City](/sell/oklahoma_city_ok), [Omaha](/sell/omaha_ne), [Philadelphia](/sell/philadelphia_pa), [Pittsburgh](/sell/pittsburgh_pa), [Portland](/sell/portland), [Prescott](/sell/prescott_az), [Reno](/sell/reno_nv), [Richmond](/sell/richmond_va), [Salt Lake City](/sell/salt_lake_city), [San Antonio](/sell/san_antonio), [Seattle](/sell/seattle_wa), [San Francisco Bay Area](/sell/sf_bay_area), [South Texas](/sell/south_texas), [Southwest Florida](/sell/southwest_fl), [St Louis](/sell/st_louis), [Tucson](/sell/tucson), [Tulsa](/sell/tulsa_ok), [Virginia Beach](/sell/virginia_beach_va), [West Texas](/sell/west_texas), [Western New York](/sell/western_ny) | [Alabama](/sell/alabama_other), [Arkansas](/sell/arkansas_other), [California](/sell/california_other), [Colorado](/sell/colorado_other), [Connecticut](/sell/connecticut_other), [Delaware](/sell/delaware_other), [Georgia](/sell/georgia_other), [Idaho](/sell/idaho_other), [Illinois](/sell/illinois_other), [Indiana](/sell/indiana_other), [Iowa](/sell/iowa_other), [Kansas](/sell/kansas_other), [Kentucky](/sell/kentucky_other), [Louisiana](/sell/louisiana_other), [Maine](/sell/maine_other), [Maryland](/sell/maryland_other), [Massachusetts](/sell/massachusetts_other), [Michigan](/sell/michigan_other), [Minnesota](/sell/minnesota_other), [Mississippi](/sell/mississippi_other), [Missouri](/sell/missouri_other), [Montana](/sell/montana_other), [Nebraska](/sell/nebraska_other), [Nevada](/sell/nevada_other), [New Hampshire](/sell/new_hampshire_other), [New Mexico](/sell/new_mexico_other), [New York](/sell/new_york_other), [North Carolina](/sell/north_carolina_other), [North Dakota](/sell/north_dakota_other), [Ohio](/sell/ohio_other), [Oklahoma](/sell/oklahoma_other), [Oregon](/sell/oregon_other), [Pennsylvania](/sell/pennsylvania_other), [South Carolina](/sell/south_carolina_other), [South Dakota](/sell/south_dakota_other), [Tennessee](/sell/tennessee_other), [Utah](/sell/utah_other), [Vermont](/sell/vermont_other), [Virginia](/sell/virginia_other), [Washington](/sell/washington_other), [West Virginia](/sell/west_virginia_other), [Wisconsin](/sell/wisconsin_other), [Wyoming](/sell/wyoming_other) | --- *Originally published at [https://www.opendoor.com/articles/earnest-money](https://www.opendoor.com/articles/earnest-money)*