What earnest money is
Earnest money is a deposit you make after your offer is accepted to show the seller you’re serious. It’s usually held by a neutral party, such as an escrow or title company or an attorney, and counts toward your down payment and closing costs when you close. If you back out for a reason your contract doesn’t allow, you can lose it.
How much is typical
Customs differ a lot by state and even by county. In New York, a deposit of about 10% of the price at contract signing is common. In California, 1% to 3% is common. New Jersey varies widely: many contracts have a small initial deposit when the offer is accepted and a larger one after attorney review. This guide shows a common range for the state you choose; your agent or attorney can tell you what’s typical for a specific home.
Why the amount matters in a competitive market
A larger deposit signals commitment and can make your offer stand out, especially when offers are close on price. It also means more money at risk if something goes wrong, so understand exactly when your deposit becomes non-refundable under your contract, usually after contingency deadlines pass.
An example
On a $650,000 offer in California, a common deposit would be about $6,500 to $19,500. The same price in New York would commonly mean a deposit closer to $65,000 at contract signing.
Protecting your deposit
- Wire money only after confirming instructions by phone with a number you already know; wire fraud targets home buyers.
- Track every contingency deadline in your contract.
- Get a receipt showing who holds the deposit.
When you get it back
If a contingency you kept isn’t met, such as a failed inspection, a low appraisal or a loan denial, and you cancel within the deadline, your contract usually entitles you to a refund. Missing a deadline can mean giving up that protection, so put each date on your calendar.
Questions buyers ask
Do I get my earnest money back?
It’s applied to your down payment and closing costs at closing. If you cancel for a reason your contract allows, such as a failed inspection within the contingency period, it’s usually refunded.
Is earnest money the same as a down payment?
Not exactly. It’s a deposit that becomes part of your down payment and closing costs at closing.
Who holds the earnest money?
Usually an escrow or title company, or an attorney, depending on the state.