Derek Morgan
Derek Morgan
Earnest Money Deposit
Derek Morgan
Derek Morgan

    Understanding Earnest Money Deposits

    When it comes to buying a home, one of the most important steps in the process is depositing earnest money. So, what exactly is earnest money and why is it so important?

    Simply put, earnest money is a deposit that a homebuyer makes when submitting an offer on a property. This deposit shows the seller that the buyer is serious about purchasing the home and it also helps to fund the down payment. 

    How Much Earnest Money Should I Put Down?

    When it comes to the amount of earnest money you should put down, it's important to know that there is no set rule. On average, buyers can expect to put down 1-2% of the total purchase price as an earnest money deposit. Depending on the real estate market you're in, the amount required can vary. Some markets may require more than 2%, while others may require less. The best thing to do is to talk with your real estate agent to get advice on how much you should put down in your specific market.

    It's also important to note that larger deposits may require verification from lenders, so make sure your funds have been held for at least 60 days prior. Your real estate agent can also guide you on the appropriate amount to deposit and ensure you make a strong offer.

    Where Does Earnest Money Go?

    Once you've made your deposit, you might be wondering where the funds go. Typically, the earnest money deposit is held in an escrow account until the closing of the sale. At closing, the funds can be used to help cover closing costs and down payments. It's important to note that if something goes wrong during the buying process, buyers can often get their earnest money back. For example, if the buyer finds problems with the property or if they cannot get title insurance. 

    Securely Holding Earnest Money

    When it comes to holding your earnest money deposit, it's important to make sure the funds are held in a secure place. The earnest money check should be cashed and held in either a title company trust account or in a broker's escrow company account. When handing over your deposit, it's important to check the credentials of who holds the deposit to ensure that your funds are held securely. This is especially important when dealing with larger deposits, as they may require additional paperwork.

    Contingencies and Protection for Buyers

    By establishing contingencies with the seller, homebuyers can protect themselves during the process. Contingencies can allow for a refund of earnest money if either the buyer or seller does not fulfill their obligations according to their agreement. This can include things like failing inspection or not replacing windows as promised. 

    In addition to contingencies, it's important to remember to write down agreements and stick to timelines. It's also a good idea to obtain homeowners insurance coverage to further protect yourself.


    In conclusion, understanding earnest money deposits is an important part of the home-buying process. They show the seller that you are serious about purchasing the home and they also help to fund your down payment. The typical amount required ranges from 1-2% of the total purchase price, but this can vary depending on the real estate market. It's important to make sure your deposit is held securely and to establish contingencies to protect yourself as a buyer. We hope this article has helped to clarify the topic of earnest money and provided helpful insight into the home-buying process. 

    Buy a home and save $2,140 on average at closing with Unreal Estate. Or sell your home faster and take home $11,114 more on average by starting a listing.

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