Earnest money is a deposit made under the terms of a purchase agreement. The useful questions are not just how much to offer. You also need to know when the deposit is due, who will hold it, how it is credited at closing and what the agreement says if the transaction does not close. Ask your agent and attorney to explain those terms before you sign.
Read the deposit provisions together
Locate the amount, delivery deadline and named holder in the agreement. Confirm the acceptable payment method and get a receipt. Ask how the deposit will be handled if an offer is rejected or if a signed transaction ends. Do not assume that an inspection concern or a financing problem automatically creates a right to a refund. The relevant provisions, notices and deadlines must be read together.
A larger deposit is a negotiating term, not proof that an offer is better in every respect. Consider how much cash you can comfortably commit and how it fits the other terms you are proposing. If something is unclear, resolve it before sending funds rather than relying on a general rule from another transaction or state.
Put contingencies on a calendar
A contingency makes a contractual obligation depend on a specified event or condition. Financing, appraisal, inspection and the sale of another home can raise different questions. Ask what each provision actually allows, when action is required and how a notice must be delivered. Keep the signed contract and any amendments accessible to everyone coordinating the deadlines.
If a problem appears, tell your agent, lender or attorney promptly as appropriate. An extension is something to document and agree, not something to assume because the participants are still talking. Avoid promising a moving date or giving up temporary housing before you understand the consequences of a delay.
Distinguish the deposit from the full cash requirement
The deposit is only part of the money involved in buying a home. Review the down payment, closing costs, prepaid items, credits and any other required payment with your lender and closing attorney. Ask how money already delivered will appear in the final calculation. The amount you need to bring to closing may change as the transaction develops.
The CFPB’s Closing Disclosure explainer helps you identify loan terms, projected payments, closing costs and cash to close. Compare the actual disclosure with your most recent Loan Estimate and ask about differences. Keep money needed for the transaction accessible in the way your lender requires, and discuss significant account movements before making them.
Ask about title, liens and escrow
Have the closing attorney explain the title work, any liens that must be resolved and the proposed title insurance coverage. Ask what a lender’s policy covers and how an owner’s policy differs. Do not assume one policy protects every party or every possible issue. A concern about ownership, an easement or an unpaid obligation needs a specific answer before closing.
Escrow can describe funds held during a transaction or a mortgage account used for certain ongoing expenses. Ask which meaning applies, who holds the funds, how they are disbursed and how you receive a record. The same word does not make the deposit account and the lender’s tax or insurance account interchangeable.
Protect the transfer of funds
Confirm payment instructions using an independently established contact method for the closing office. An unexpected email with a new account or urgent transfer request needs verification. Do not rely on a phone number supplied only in the message you are trying to verify. If you suspect that funds went to the wrong place, contact your financial institution and the closing professionals immediately.
Keep the confirmation and receipt securely with your transaction documents. Avoid sending sensitive account information to a group text or an unverified person simply because they appear to know the property address.
Use the final walkthrough to check the agreed condition
Arrange the walkthrough with your agent and compare the property with the agreement, including documented repairs and items that are supposed to remain. Raise an unresolved issue before signing and ask your attorney how it should be addressed. The walkthrough does not replace earlier inspections or create a new right to renegotiate every feature.
After closing, retain the signed documents and learn whom to contact about servicing and payments. Our moving checklist covers the practical handoff from the transaction to living in the home.
Sources and scope
CFPB Closing Disclosure explainer; CFPB closing resources. Deposit rights and remedies depend on your signed agreement and applicable law; have your attorney explain them.
