What is Earnest Money, and how much will I need?

Real Estate 101: Earnest Money

You’ve found the home you want to purchase, and you are writing an offer. Congratulations! Your REALTOR® will remind you that Earnest Money (or a promise to pay it within a few days) is expected to accompany the offer to purchase a home, but what is it?

A buyer puts earnest money towards the purchase to tell the seller that they are serious about buying the home – it is a show of good faith. This money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing.

Typically the amount for earnest money is 1-2% of the offer price, but the seller will designate the amount they want for earnest money. As with everything else, this amount is negotiable.

There are many reasons why the buyer’s earnest money could be returned in the event that the purchase does not go through, and a few reasons why the seller could keep the earnest money.

Often the title company will hold the earnest money, and it is applied toward the down payment amount at closing. It is not in addition to the purchase price, but a portion of it given up front.



Real Estate 101 is a blog series to help you better understand the terminology and processes of buying and selling real estate. I hope that you find this series helpful!

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What is earnest money, and how much do I need?

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