When a buyer makes an offer on your home, they often include something called an earnest money deposit. It is a sign of good faith that shows they are serious about purchasing your property.
For sellers, understanding how earnest money works can help you protect your deal and avoid confusion later.
Here is everything you need to know about earnest money deposits and how they fit into your home sale.
1. What an Earnest Money Deposit Is
An earnest money deposit, sometimes called a good faith deposit, is a small amount of money the buyer provides shortly after their offer is accepted.
It is usually held by a neutral third party such as a title company, real estate broker, or escrow company until the closing date.
Think of it as a promise — the buyer is committing to follow through with the purchase as long as the terms of the contract are met.
2. How Much Earnest Money Buyers Usually Offer
The amount varies depending on the market and price of the home. In most cases, buyers put down between 1% and 3% of the purchase price.
For example, on a $400,000 home, the earnest money deposit could range from $4,000 to $12,000.
A larger deposit can make a buyer’s offer look stronger and more serious, especially when there are multiple offers.
3. What Happens to the Earnest Money
Once the deposit is made, the money stays in the escrow account until closing. It will later be applied toward the buyer’s down payment or closing costs when the sale is finalized.
If the deal closes as planned, the seller does not directly receive this money — it simply goes toward the total purchase funds.
If the sale falls through, what happens next depends on the terms of the contract.
4. When the Buyer Can Get It Back
In most cases, the buyer can get their earnest money deposit back if the contract is canceled for reasons covered by a contingency. Common contingencies include:
- The buyer’s financing is denied
- The home does not appraise for the agreed price
- The inspection reveals major issues
- The buyer’s current home does not sell in time
These contingencies protect the buyer and are usually time-sensitive. As long as the buyer cancels within the agreed period and follows the contract terms, they are entitled to a refund.
5. When the Seller May Keep the Deposit
If the buyer backs out of the deal without a valid reason or after all contingencies have expired, the seller may have the right to keep the earnest money.
This compensation helps offset the time the property was off the market and any missed opportunities to sell to other buyers.
It is important to review your contract carefully and communicate with your title company or real estate attorney before assuming ownership of the funds.
At List With Freedom, our team helps you stay organized and ensures all deposits and documents are handled correctly through your transaction.
6. Why Earnest Money Matters to Sellers
Earnest money shows commitment. A buyer willing to put money down upfront is signaling that they are serious about completing the purchase.
It also adds a layer of protection for sellers, since it discourages buyers from backing out casually or continuing to shop for other homes after making an offer.
Understanding how it works helps you make smarter decisions when reviewing offers. If two offers are close in price, the size and terms of the earnest money deposit can make one offer more appealing than the other.
Staying Confident Through the Process
Earnest money deposits are a normal part of selling a home, and when handled properly, they benefit both sides.
For sellers, the key is knowing what to expect, how to verify the deposit, and what your rights are if the buyer walks away.
At List With Freedom, we help you navigate every part of the selling process — from reviewing offers and deposits to closing the deal. Our team is here to make sure everything runs smoothly so you can focus on your next move.
When you understand the details, you can move forward with confidence knowing your sale is protected and on track.
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