How Much Earnest Money Should You Actually Put Down

You found the house. Your agent is asking for a number for line 4 of the offer, due in 24 to 48 hours after acceptance. Too low and the seller reads you as a tire kicker. Too high and you've got real cash exposed if something goes wrong before closing.

Here's the answer: in most markets, 1% to 3% of the purchase price is standard. On a $400,000 house, that's $4,000 to $12,000. In a competitive bidding situation, sellers and their agents start paying attention north of 3%. In a slow market where you're the only offer on the table, you can often get away with 1% or even a flat $1,000 to $2,000.

That's the range. The right number inside it depends on three things: how hot the market is, how good your contingencies are, and how much cash you're actually willing to risk between now and closing.

What earnest money actually does

Earnest money is not a fee. It's not extra cash on top of your down payment. It's a deposit that gets held in escrow, usually by the title company or a real estate brokerage, and it applies toward your down payment and closing costs at the closing table. If the deal closes, you don't lose a dime of it, it just moves from "earnest money" to "part of what you already owed."

The only time you lose it is if you back out of the deal for a reason not covered by your contingencies. That's the whole function of the deposit: it tells the seller you have something to lose if you're not serious, which is why sellers weight it heavily when they're comparing offers.

Why the percentage moves with the market

In a seller's market, multiple offers on one house, sellers use earnest money as a filter. If you offer $10,000 in earnest money and someone else offers $3,000, a seller reading two otherwise identical offers picks yours, because your number signals you're less likely to walk. I've seen buyers push to 5% specifically to win a house against four other offers. That's not standard advice, that's a competitive tool, and it only makes sense if you're confident in your financing and your inspection is going to be clean.

In a buyer's market, one offer, house has been sitting, you don't need to prove anything. A token deposit, $1,000 to $2,000, does the job. Sellers in that position are more worried about the deal falling apart at all than about your deposit size.

Cash offers tend to run higher earnest money too, because there's no lender in the chain who might kill the deal, so the seller has fewer reasons to worry and the buyer has more room to offer confidence through the deposit itself.

What people get wrong

The biggest mistake is treating the earnest money number as free to inflate. It's not free. It's cash you cannot touch from the moment you sign until closing, and it is genuinely at risk if you miss a contingency deadline or waive a contingency you shouldn't have.

Second mistake: assuming a bigger deposit fixes a weak offer. It doesn't. If your financing is shaky or your offer price is below what comps support, no amount of earnest money changes that math for the seller. It's a tiebreaker, not a trump card.

Third mistake: not reading what the contingencies actually protect. An inspection contingency, financing contingency, and appraisal contingency are what let you walk away and keep your deposit. Waive one of those to make your offer look stronger, which is a real strategy in hot markets, and you've just converted your earnest money from "safe if the deal falls through" to "gone if the deal falls through." That's a bigger decision than the dollar figure itself.

A worked example

Say you're buying a $350,000 house. Two scenarios:

Scenario A, standard offer. You put down 2%, which is $7,000, held in escrow with a title company. You keep your inspection, financing, and appraisal contingencies intact. Inspection turns up a bad roof estimated at $18,000 to replace. You use the contingency to renegotiate or walk. Either way, your $7,000 comes back to you in full, usually within 5 to 10 business days after the deal is terminated.

Scenario B, competitive offer. Same house, but you're one of six offers. You go to 3%, $10,500, and you waive the inspection contingency to strengthen your position because your agent tells you it's what's winning deals in that neighborhood right now. You get the house. Then you find the same bad roof after closing, because you didn't inspect first, or you inspected for information only with no right to renegotiate. Your $10,500 was never at risk from the roof itself, since you closed, but the decision that put it at risk was waiving the contingency, not the size of the deposit.

The dollar amount and the contingency structure are two separate decisions. Treat them that way when your agent asks you to decide both in the same conversation.

Where the money actually goes

Earnest money doesn't go to the seller directly and it doesn't go to your agent. It goes to a neutral third party, usually the title company handling the closing, sometimes the listing brokerage's trust account depending on your state. That party holds it until closing, at which point it shows up as a credit on your closing disclosure, or until the deal terminates, at which point both sides have to sign a release before it's returned.

If you're ever asked to wire earnest money directly to a seller, an individual, or an account that isn't a title company or brokerage trust account, stop. That's the single most common way buyers actually lose this money, not through a broken deal, but through wire fraud. Call the title company directly, using a phone number you look up yourself, not one from the email, before you send anything.

The honest limitation here

There's no fixed rule. What counts as "competitive" earnest money in Dallas is different from Seattle, and what your agent tells you is standard in your specific zip code this month is worth more than any percentage I can hand you here. Local norms, current inventory, and how the specific seller is behaving all move this number more than a general formula does. Use 1% to 3% as your starting range, then let your agent tell you where in that range this specific deal sits.

If you're at the stage where you're staring at a purchase contract trying to figure out what number to write on that line, you're past the point of reading and into the point of doing. Deal Machine walks you through the actual offer, contingencies, and deposit structure deal by deal, so you're not guessing on the number that has your cash attached to it. You can find it at readmoneydecoded.com/deal-machine.

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