When you’re ready to buy a home, the term “earnest money” becomes a key player in your real estate journey. Often considered a deposit of good faith, earnest money is an upfront payment made to the seller that shows you’re serious about purchasing the property. Typically, this amount ranges between 1% and 10% of the home’s sale price and is due within a day or two of going under contract. It’s not a fixed amount, and you can negotiate with the seller to find a mutually agreeable sum.

Once submitted, earnest money becomes part of your down payment. It’s held in an escrow account until closing, giving you time to secure financing and complete inspections. If the deal falls through for reasons outlined in the contract—such as a low appraisal or major inspection issues—you can usually get your earnest money back. However, if you back out without a valid reason, you might lose this deposit.

This is where a knowledgeable real estate agent comes in. They’ll keep track of important dates and conditions, ensuring that your earnest money is protected. With their guidance, you can navigate the complexities of real estate transactions with confidence, making your home-buying experience as smooth as possible.

Sources: Investopedia