Earnest money: the deposit that shows you're serious

When your offer is accepted, you back it up with earnest money — a good-faith deposit that tells the seller you're committed enough to put cash at risk. It's not a fee and it's not extra money; at closing it's credited toward your down payment and closing costs. But between contract and closing it sits in limbo, and whether you get it back if the deal collapses depends entirely on your contingencies and your deadlines.

How much, and where it goes

Earnest money typically runs 1–3% of the purchase price, though hot markets push it higher and some buyers offer more to strengthen an offer. On a $400,000 house, that's usually $4,000–$12,000. The money is not handed to the seller — it's deposited with a neutral third party, usually the title company, an escrow company, or a broker's trust account, and held until closing or until the contract dictates who receives it.

When you get it back — and when you don't

Your contingencies are the exit ramps that protect the deposit. If you cancel for a reason your contract allows, the earnest money is refunded. If you walk for a reason it doesn't cover — or blow a deadline — the seller can claim it as compensation for taking the home off the market.

• Protected exits (deposit returned): the home fails inspection within your inspection window, it appraises below the price with an appraisal contingency, your financing falls through under a financing contingency, or the title comes back clouded.
• Unprotected exits (deposit at risk): you get cold feet, you miss a contingency deadline, you fail to close on time without cause, or you waived the very contingency that would have covered your reason for leaving.

Protecting your deposit

1. 1
   Never wire it based on an email

   Wire fraud targets earnest money constantly. Confirm wiring instructions by phone using a number you found independently — never one sent to you — before moving a dollar.

2. 2
   Keep the money with a neutral third party

   Deposit it with the title or escrow company, not directly with the seller. A neutral holder can't release it without following the contract.

3. 3
   Calendar every contingency deadline

   The day you go under contract, mark the inspection, appraisal, and financing dates. A missed deadline silently converts a refundable deposit into the seller's money.

4. 4
   Waive contingencies knowingly, if at all

   In competitive markets buyers waive protections to win. Understand that each waiver puts the deposit — often thousands of dollars — directly on the line.

The bottom line

Earnest money is a refundable good-faith deposit, credited to you at closing, that turns into the seller's compensation only if you breach the contract or miss a deadline. Keep it with a neutral third party, verify wiring instructions by phone, guard your contingency deadlines like the money they represent, and waive protections only with your eyes open.