Earnest money deposit: how much, when, and when you get it back
Earnest money is the deposit that tells a seller you're serious. It's also the money most at risk if you walk away for the wrong reason. Here's how much to offer, where it should sit, and exactly when it's refundable.
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Short answer
What is an earnest money deposit?
An earnest money deposit (EMD) is a 1%–3% good-faith deposit a buyer wires to a neutral escrow account when a seller accepts their offer. It's refundable if a contingency lets you back out on time, and it's credited toward your down payment at closing. Miss a deadline or waive the wrong contingency and the seller keeps it.
Sizing
How much earnest money to offer
- 1% — balanced market: standard baseline when you're the only offer on the table.
- 2%–3% — competitive market: signals commitment without exposing much extra cash to fraud risk.
- 3%–5% — hot metros or bidding wars: pairs well with an escalation clause or waived appraisal contingency.
- Above 5%: rare, usually reserved for very high price bands or contested luxury properties.
When it's refundable
Refundable vs. non-refundable earnest money
Refundable — contingencies still active: failed inspection (with written notice by the inspection deadline), denied financing, low appraisal, title defect, seller can't deliver. The escrow holder releases the deposit back to you.
Non-refundable — you get to keep the house or lose the deposit: you decide not to close for a reason not protected by an active contingency, you miss a contingency deadline, or you waived that contingency to win the offer.
Any dispute goes to whichever process the contract specifies — typically mediation first, then arbitration or small-claims court. The escrow holder won't release the money unilaterally.
Frequently asked questions
Questions buyers ask
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