An earnest money deposit — often called an EMD — is money you put down when you make an offer on a home to show the seller you mean business. It's not a fee; it's a good-faith gesture that gets credited toward your purchase.
How It Works
When you submit an offer, the earnest money amount is included in the offer terms. If the seller accepts, you pay the deposit — typically through your real estate agent — and it goes into an escrow account held by a neutral third party, often a title company or real estate attorney. It sits there until the deal closes, at which point it's applied toward your down payment or closing costs.
How Much Should You Expect to Put Down?
Earnest money amounts vary by market and home price. In many transactions, it's somewhere between 1% and 3% of the purchase price, but local norms differ. Your real estate agent can tell you what's typical in your area and what amount is likely to be taken seriously by sellers.
When Is It Refundable?
This is where the details really matter. Whether you can get your earnest money back if the deal falls apart depends on the contingencies in your purchase contract.
Common contingencies that can protect your deposit include:
- Inspection contingency — if the home inspection reveals significant issues and you decide not to proceed
- Financing contingency — if your mortgage doesn't come through after a good-faith effort to secure it
- Appraisal contingency — if the home appraises for less than the purchase price
If the deal falls through for a reason covered by a contingency, the earnest money is typically returned to you. If you simply change your mind without a contractual reason, you may forfeit it.
Non-Refundable Deposits
Some purchase agreements include non-refundable earnest money, meaning the seller keeps it regardless of why the deal doesn't close. These terms are negotiable, so read the contract carefully and ask your agent to walk you through what protections are in place before you sign.
Understanding your financing picture before you make an offer is one of the best ways to protect your earnest money. If you know you're solidly pre-approved, you're less likely to lose your deposit over financing complications.
