Everything buyers need to know about the deposit that secures your offer — and the mistakes that can cost you tens of thousands.
When you make an offer on a home, your earnest money deposit tells the seller you're serious. It's real money — held by a neutral third party — that shows you have skin in the game. Get it right, and it's just an early piece of your down payment. Get it wrong, and you could lose $10,000 to $60,000 before you ever own the home.
This guide covers exactly how earnest money works, how much you need, what protects it, and what puts it at risk.
Full-service buyer representation — including managing broker oversight on every deposit decision — at a transparent flat fee. Plus a rebate at closing.
Calculate Your SavingsEarnest money — also called a good faith deposit — is a sum of money you put down when your offer is accepted. It demonstrates your commitment to completing the purchase. The deposit is held in an escrow or trust account by a neutral third party (usually a title company, escrow company, or the listing broker) until closing.
At closing, your earnest money is credited toward your down payment and closing costs. It's not an additional expense — it's money you were going to pay anyway, just delivered earlier in the process.
| Home Price | 1% Deposit | 2% Deposit | 3% Deposit |
|---|---|---|---|
| $500,000 | $5,000 | $10,000 | $15,000 |
| $750,000 | $7,500 | $15,000 | $22,500 |
| $1,000,000 | $10,000 | $20,000 | $30,000 |
| $1,500,000 | $15,000 | $30,000 | $45,000 |
| $2,000,000 | $20,000 | $40,000 | $60,000 |
Earnest money norms vary significantly by location and market conditions:
Your offer is accepted and the purchase agreement is signed by both parties. The clock starts on your earnest money deadline — typically 1-3 business days to deliver the deposit.
You wire or deliver a cashier's check to the escrow/title company. Personal checks are sometimes accepted but take longer to clear. The funds are held in a neutral trust account — never sent directly to the seller.
During active contingencies (inspection, financing, appraisal), your deposit is protected. If you discover a deal-breaker and exercise a contingency, your earnest money is returned in full.
Once you remove contingencies, your earnest money is at greater risk. Backing out after this point usually means forfeiting part or all of the deposit.
Your earnest money is credited to your side of the transaction — applied to your down payment and closing costs. You don't pay it again; it's already accounted for.
Your deposit is protected as long as you're within an active contingency period. Here's what triggers a full refund:
Once contingencies are removed or expired, walking away from the deal usually means losing your deposit. Common scenarios:
Most purchase agreements require earnest money within 1-3 business days of mutual acceptance. Miss it, and the seller can void the contract — and you lose the house without any deposit protections applying.
Each contingency has a specific expiration date. In some states, contingencies expire automatically — meaning your earnest money protections vanish whether you intended to remove them or not. Your agent should be tracking every deadline on your behalf.
Wire transfers and cashier's checks clear quickly and demonstrate financial readiness. Personal checks can take days to clear and may signal uncertainty to the seller. In competitive markets, this detail matters.
Wire fraud is real and growing. Always verify wiring instructions by calling the escrow or title company directly using a known phone number — never from an email. Scammers intercept emails with fake wiring instructions, and once the money is sent, it's usually gone.
The listing agent may push for early contingency removal. Your earnest money protection is too important to rush. A good buyer's agent pushes back when your interests require it — and knows when accommodation is strategically smart.
At ShopProp, every buyer — whether purchasing a $500K starter home or a $7.5M estate — has a managing broker reviewing every deadline, every contingency removal, and every deposit decision. Plus a rebate at closing.
Get Started Chat with Our AI Assistant| Deposit Type | Purpose | Typical Amount | Refundable? |
|---|---|---|---|
| Earnest Money | Good faith commitment to purchase | 1-3% of price | Yes, during contingency periods |
| Option Fee (TX) | Unrestricted right to terminate | $100-$500 | No — paid for the option right |
| Down Payment | Equity in the home at closing | 3-20% of price | N/A — paid at closing |
| Appraisal Fee | Home valuation for lender | $400-$800 | No — paid for the service |
| Home Inspection | Professional property assessment | $400-$1,000 | No — paid for the service |
Earnest money is one of the first financial commitments you make as a buyer — and one of the most consequential. The deposit itself isn't the risk; the risk is in not understanding when it's protected and when it's not.
Every contingency deadline, every removal decision, every wire transfer instruction matters. This is why having an experienced managing broker — not a junior agent learning on your transaction — is worth more than whatever you think you're saving by going with a cheaper option.
At ShopProp, you don't pay a percentage. You pay a flat $4,495, get a managing broker on every transaction, and receive a rebate at closing. Since 2007, 4,000+ transactions. Your earnest money is too important for anything less.