💰 Earnest Money Explained: The “Good Faith” Deposit That Protects You (and the Seller)

So you’re buying a house—congrats! 🎉
But wait… what’s this thing called earnest money?

Let me break it down for you.

🎯 What Is Earnest Money?

Earnest money is like putting a “hold” on your dream house.
You’re telling the seller:

✅ “I’m serious.”
✅ “I’m ready to buy.”
✅ “I’m not just window shopping.”

It’s usually 1%–3% of the home price. In hot markets, it could be 5–10% to stand out! 🔥

📌 Important: It’s NOT extra money. If the sale goes through, it goes toward your down payment or closing costs.

🛠️ How It Works (Step by Step)

📝 You make an offer and it gets accepted.

💵 You pay the earnest money (check or wire—no cash!).

🔐 It goes into escrow—a safe place held by a neutral party.

📆 The money stays there while you do inspections, appraisals, get your loan, etc.

✅ If the deal closes, the money helps pay your costs!

❌ If you back out for a legit reason (like inspection problems), you get it back.

🤝 Why It Matters

To the seller, this shows you’re all in. 🏠
They’re taking their home off the market for you—this proves you're not wasting their time.

To you, it shows you're ready to play the game. And in competitive markets, that can make or break your offer.

🚨 When You Can Lose It

Yikes—yes, you can lose your earnest money if you break the rules.

Here's how:

🚫 You miss deadlines
🚫 You back out without a valid reason
🚫 You waive protections and get cold feet

That’s why we need to talk about...

⚖️ What Happens If There’s a Dispute?

Let’s say the deal falls apart, and both sides think they should keep the money.

The escrow company can’t just pick sides.

They’ll freeze the money until:

✅ Both sides agree in writing
OR
⚖️ A court or mediator makes a decision

So yes, it’s serious—read your contract, know your deadlines, and don’t go MIA.

✅ Quick Recap

🔹 Earnest money = your deposit that shows you’re serious
🔹 It goes into escrow until the deal closes
🔹 If the sale closes, it helps cover your costs
🔹 If the sale falls through for a valid reason, you get it back
🔹 If you back out for no reason, you could lose it 💸
🔹 Contingencies = your protection

💡 Pro Tip: Always work with a great real estate agent who can help you protect your earnest money and hit every deadline.

Want to talk strategy before you make an offer?
📩 Shoot me a message and I’ll walk you through exactly how to play it smart in today’s market.