Many first time homebuyers ask “What is earnest money?”, an earnest money deposit  (called EMD) shows the seller that a buyer is serious about purchasing a property. When the transaction is finalized, the funds are put toward the buyer’s down payment. If the deal falls through, the buyer may not be able to reclaim the deposit- depending upon the circumstances. Typically, if the seller terminates the deal, the earnest money will be returned to the buyer. When the buyer is responsible for retracting the offer before any of their contingencies are expired, then the seller will usually be awarded the money. Sometimes they spilt the money to cancel escrow. The EMD is there to protect the Seller from being taken off the market, the longer the buyer keeps the property “Off Market” the more EMD damages may be incurred by seller, therefore the buyer may lose all or a portion of the EMD.


Without earnest money, you could make offers on many homes, essentially taking them off the market until you decided which one you liked best. However, sellers rarely accept offers without earnest money deposits.

The amount you’ll pay for the earnest money deposit will depend on a few factors, such as policies and limitations in your state, the current real estate market, and what the seller requires. On average, however, you can expect 1-2% of the total purchase price as earnest money.

Another excellent question is “When do you pay the earnest money, and who holds it.”

In most cases, after your offer is accepted and you sign the purchase agreement, you give your earnest money deposit to the escrow/title company. In some states, the real estate broker holds the deposit, in the state of Nevada it is customary that the broker does not hold the EMD and it is deposited directly with the escrow company.

Always check the credentials of the escrow firm or broker taking the deposit and verify that the funds will be held in escrow. Never give the earnest money to the seller; it could be difficult or impossible to get it back if something goes wrong.  After turning over the deposit, the funds are held in an escrow account until the home sale is in the final stages. On closing day, the funds are released from escrow and applied to your down payment.




If the deal falls through, getting ones EMD back all depends on the circumstances. There could be a cancellation fee, and if so it’s usually taken out of the deposit. The broker or escrow company cannot determine whether you should get the money back under the terms of the purchase agreement. They act as a neutral third party and cannot make a decision on who deserves the EMD funds upon cancellation; they can only credit it towards a successful transaction closing. My advice is to make sure that your purchase agreement covers how a refund is handled.

Keep in mind that even if you are pre-approved for a mortgage loan, you can be declined when you apply for one. In such cases, standard contracts allow you to recover your earnest money deposit. Additionally, one can also usually get their money back if you find problems with the property.

The best way to protect your EMD is to hire a true professional that has the negotiation skills and expertise to thoroughly review a purchase contract and represent you in your transaction. Hire an Industry Expert like myself. My name is Dulcie Crawford and I have over 17 years of real estate experience. I am an expert negotiator in the real estate industry, also I hold the designation of a CNE-Certified Negotiations Expert.

If you have any questions or want to see more of my community and industry blogs, please visit For any other questions you may have, do not hesitate to call anytime at 702.505.2775