Earnest Money Explained: How Much and What Happens to It
Earnest money is a deposit a buyer puts down shortly after a purchase offer is accepted, signaling serious intent to complete the purchase. It's held in escrow, not paid directly to the seller, and is later credited toward the down payment or closing costs if the sale closes. How much earnest money is typical There's no fixed legal amount — it's negotiated as part of the offer and varies by local market norms and how competitive the market is. In slower markets it might be a smaller flat amount; in competitive markets, buyers sometimes offer a larger deposit as a way to strengthen their offer against competing bids. Where the money goes Earnest money is deposited into an escrow account, typically held by a title company, real estate brokerage, or attorney — not the seller directly. This protects both parties: the seller has assurance the buyer is serious, and the buyer's funds are held neutrally rather than going straight to the seller before closing. What con...