What is earnest money?

On Behalf of | Oct 28, 2020 | Real Estate Transactions | 0 comments

When you want to buy a home, you may be up against some competition, especially if it is a good market. To be the one who gets the home in the end, it can help to sweeten the deal with some earnest money.

Forbes explains that earnest money is what you give when you make your offer to show you are serious about buying the property. It will later become part of your down payment if the offer goes through.

Potential loss

You should note that if you put down earnest money and later you break the contract, the seller could end up keeping the money. To safeguard your deposit, make sure you understand the conditions. Know when you could lose it and how to ensure you get it back if you end up not buying the home. If the seller does not accept your offer upfront, then you will get the money back. Issues usually happen later in the process.


There are no rules about earnest money. You put down what you think is a fair amount. It often depends on how bad you want the property and the general situation. If things are incredibly competitive, then you may want to put more down. In general, anything from 1% to 5% is common.

The goal of the money is to make your offer stronger because it shows you have the cash to buy the home. So, you need to consider what will make your offer the strongest so that you have the winning offer. It really is a case-by-case type situation.