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What is Earnest Money?

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Earnest money typically falls between 1% and 5% of your purchase price. Higher amounts are more common in a seller's market with multiple offers.

Is earnest money refundable?

In some cases, it is. While changing your mind isn't going to get your money back, a buyer can get their money back depending on these four contingencies2 they can write into their offer.

  • Home inspection. If a home inspection reveals condition issues that are unsatisfactory to the buyer, they have the right to get out of the deal with their deposit money.
  • Appraisal. If a third-party appraiser deems the property overvalued, the buyer can choose to negate the contract and get their earnest money back.
  • Financing. If the offer has a financing contingency and the buyer isn't approved for a mortgage, the buyer has the right to get out of the agreement and get their deposit back. Being pre-approved for a mortgage doesn't guarantee loan approval.
  • Existing home sale. If the buyer has a contingency on the sale of an existing home and can't sell the property by the timeline stated in the offer, they can back out of the contract and get their earnest money back.

It's important to note that each of these contingencies has deadlines. If the buyer misses the deadline to back out of the deal due to a certain contingency, they may have to forfeit their earnest money. Of course, if the seller backs out of the contract for any reason, the escrow money will be refunded to the buyer.

Buying a home, especially when you're a first-time home buyer, is an exciting time. It's also a serious purchase. Earnest money helps ensure a smooth transaction that can help you secure the home of your dreams.

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Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Bill Gassett, “Earnest Money: A Primer for New Agents," REALTOR Magazine, published January 9, 2020, accessed July 17, 2021. Back
  2. Kevin Graham, “Earnest Money: What Is It and How Much Is Enough?" Rocket Mortgage, published May 11, 2021, accessed July 19, 2021. Back