Earnest money is a deposit you make when your offer is accepted. It is a good-faith signal to the seller that you intend to follow through, and it gets applied to your costs at closing.
How much is typical
Earnest money usually runs about 1% to 3% of the purchase price, though hot markets can push it higher. It is held by a neutral third party, like a title or escrow company, not by the seller directly.
Do you get it back
Yes, in most cases, if you back out for a reason covered by your contract. Common protections, called contingencies, let you walk away and keep your deposit.
- Financing contingency: your loan does not come through
- Inspection contingency: the inspection turns up serious problems
- Appraisal contingency: the home appraises for less than the price
When you could lose it
If you cancel for a reason not protected by your contract, or you miss key deadlines, the seller may be able to keep your deposit. Read your timelines carefully.
Earnest money is not an extra cost. It counts toward your down payment and closing costs at the finish line.