Earnest Money Explained
One of the biggest misconceptions about buying a home is that earnest money is "lost" if the deal falls through. In most cases, that's simply not true.
Earnest money is a deposit you make after your offer is accepted. Think of it as a good-faith deposit that shows the seller you're serious about buying the home.
The money is held by the escrow company, not the seller, until closing.
If the sale closes, your earnest money isn't an extra fee. It's applied toward your down payment and closing costs.
How much is earnest money?
There's no set amount, but in the Portland Metro and Southwest Washington markets it's typically a percentage of the purchase price. The amount can vary depending on the home, the market, and the terms of your offer.
When do I have to deposit it?
Your purchase agreement will include an agreed-upon deadline for depositing earnest money. In Oregon and Washington, this is often within a few business days after the seller accepts your offer, but the exact timeline is negotiated as part of the contract.
What happens after my offer is accepted?
Once your offer is accepted, the contract outlines several important timelines that both the buyer and seller agree to follow. These can include:
Earnest money deposit deadline
Home inspection period
Financing contingency
Appraisal
Title review
Closing date
These deadlines help keep the transaction moving forward and ensure everyone knows what needs to happen—and when.
Do I lose my earnest money if I back out?
Not necessarily.
If you decide to terminate the contract during one of your contractual contingency periods—such as the inspection contingency or another agreed-upon contingency—you can often receive your earnest money back.
However, if you back out after those protections have expired without another valid contractual reason, you could risk forfeiting your earnest money.
Every transaction is different, so it's important to understand the timelines and contingencies written into your contract before making any decisions.
My advice
Earnest money sounds intimidating, but it's simply one part of the home buying process. Before you sign anything, I'll walk you through every important date, explain what each contingency means, and make sure you know exactly what your options are at every stage of the transaction.
You should never feel like you're guessing your way through one of the biggest purchases of your life.
