Definition
Earnest Money
Also called: good faith deposit, escrow deposit
Earnest money is a deposit the buyer puts down when a contract is signed, held in escrow by a title company or attorney, showing they're serious. If the buyer walks without a contractual reason, the seller typically keeps it.
The amount varies — often 1–3% of the price in retail sales, and frequently a flat few thousand dollars in investor purchases. What matters more than size is who holds it: escrow with a neutral third party protects both sides, while a deposit 'held' by the buyer protects nobody.
Contracts spell out when the deposit becomes non-refundable and which contingencies let the buyer recover it. A cash buyer asking for long inspection periods with a tiny refundable deposit is keeping a free option on your house; shorter periods and meaningful non-refundable deposits are the mark of a buyer who intends to close.
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