Understanding Earnest Money—What It Is and Why It Matters

If you're starting the homebuying process, you've probably heard the term “earnest money” tossed around—but what exactly is it, and why is it such an important part of the transaction? At Embry Group Real Estate, we believe in making every step of your journey clear and confident, and that starts with understanding the basics.

What Is Earnest Money?

Earnest money is a deposit a buyer puts down when making an offer on a home. Think of it as a way to show the seller that you’re serious about purchasing the property. This deposit—often 1–3% of the purchase price—is held in escrow until closing.

If the deal goes through, the earnest money is usually applied toward your down payment or closing costs. If not, the outcome depends on the terms of your contract.

Why It Matters

Earnest money serves as a good-faith gesture. In a competitive market, it can help your offer stand out. Sellers see it as a sign that you’re financially committed and not likely to back out without cause. It also helps establish trust early in the process.

But it’s not just for show—it’s a legally binding part of your contract. If you back out of the deal for a reason not covered by a contingency in your contract (such as inspection issues or financing falling through), you could forfeit that deposit.

When Do You Pay It?

Earnest money is usually due within a few days of your offer being accepted. Your real estate agent will guide you through the specific timeline based on your contract and local customs.

Can You Get It Back?

Yes—if the contract includes contingencies (like financing or inspection) and one of those becomes a legitimate reason to walk away, you’re typically entitled to a full refund of your earnest money. However, if you decide to back out for reasons not outlined in the agreement, the seller may be entitled to keep the deposit.

How Much Should You Offer?

There’s no set rule, but a common amount is 1–3% of the home’s price. In more competitive markets, offering more earnest money can signal to the seller that you’re especially serious. Your real estate agent can help you determine an appropriate amount based on current market conditions.

Bottom Line: Earnest money isn’t just another box to check—it’s a key part of protecting your interests and showing your commitment as a buyer. At Embry Group Real Estate, we’ll guide you through the process and make sure your offer is strong, smart, and fully supported from day one.

Ready to buy with confidence? Let’s talk about your home goals—click HERE to schedule a consultation.