Earnest MoneyExplained
The deposit that tells sellers you mean business. Understand how to protect it.
What Is Earnest Money?
Earnest money is a good faith deposit you provide when making an offer on a home. It signals to the seller that you're serious about the purchase and have the financial means to follow through.
Shows Commitment
By putting your own money on the line, you assure sellers you won't simply walk away from the deal without a valid reason.
Held in Escrow
Your deposit goes into a neutral third-party escrow account—not directly to the seller—protecting both parties until closing.
Applied at Closing
At closing, your earnest money is credited toward your down payment or closing costs—it's not an additional expense.
"Earnest money is like the glue in a successful real estate transaction."— National Association of REALTORS®
One of the primary concerns sellers have is certainty—how serious is the buyer and what's the likelihood of closing? A substantial earnest money deposit directly addresses this concern.
How Much Earnest Money Should You Put Down?
The typical range is 1% to 3% of the purchase price, but market conditions can push this higher. On a $400,000 home, that's $4,000 to $12,000.
Buyer's Market
Balanced Market
Seller's Market
Competitive Market Strategy
In hot markets like Phoenix, Miami, or Austin, offering 5% to 10% earnest money can make your offer stand out. But remember: the higher your deposit, the more you risk losing if you back out without a valid contingency.
Contingencies ThatProtect Your Money
Contingencies are conditions in your purchase contract that allow you to back out and get your earnest money refunded.
Inspection Contingency
Allows you to have the property professionally inspected and withdraw if significant issues are discovered.
Appraisal Contingency
Protects you if the home appraises for less than the agreed-upon purchase price.
Financing Contingency
Gives you time to secure a mortgage. If you cannot obtain financing, you can cancel the contract.
Sale of Existing Home
Makes your purchase conditional on selling your current home first.
When You Could Lose Your Deposit
If you decide to cancel for a reason not covered by a contingency in your contract, you risk forfeiting your earnest money to the seller as compensation for the time and opportunity they lost.
Earnest Money by State
Real estate practices vary by state. Here's what to expect in Arizona.
Arizona
- Arizona Association of REALTORS® contract includes standard 10-day inspection period
- Earnest money becomes "at risk" after contingencies are removed
- Title company holds funds in trust account
Watch &Understand
Educational videos explaining earnest money deposits, contingencies, and how to protect your investment.
What Is Earnest Money? Home Buying 101
Quick overview of earnest money deposits, how much to put down, and what happens to your deposit during the transaction.
Video Playlist
4 educational videos
Educational content for home buyers
Frequently Asked Questions
Everything you need to know about earnest money deposits.
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