Contract Glossary
Earnest Money
Definition
A deposit made by a buyer to show they're serious about a purchase, most often in real estate. If the deal goes through, the earnest money gets applied to the purchase price. If the buyer backs out without a valid reason, the seller usually keeps it.
In Practice
You'll typically put down 1–3% of the purchase price as earnest money when you make an offer on a house. The money goes into an escrow account until closing. If you walk away for a reason not covered by your contract's contingencies — like simply changing your mind — you'll lose that deposit.
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Frequently asked questions about earnest money
Most real estate transactions require 1–3% of the purchase price. In competitive markets, buyers sometimes offer more to stand out. A $300,000 home typically calls for $3,000–$9,000 in earnest money.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.