Why Does Earnest Money Matter?


Earnest Money is traditionally a 1 – 3% deposit of the purchase price of the home. Earnest money shows the seller(s) that you are making a good faith effort to do what you said you are going to do – Purchase their home!


Home sellers are looking for the highest and BEST offer. And best doesn’t always mean the highest price. By increasing your Earnest Money deposit, the sellers see that you:

  1. Are a serious and motivated buyer that has the financial capabilities to purchase their home.
  2. Aren’t likely to walk away a few days before closing
  3. That you have at least a portion of your said downpayment to finalize the purchase at closing.

In a nutshell, the larger the Earnest Money deposit, the more favorable your offer will look to the seller.


Your money (if you are using Escrow) is held in a safe holding account with your chosen Escrow provider. This is a neutral 3rd party to the transaction that holds funds between the buyer and seller until the sale is final. At the end of the transaction your deposit goes towards your closing costs, down payment or additional debts that you owe upon purchasing the home. Additionally, your earnest money is NOT added on to the purchase price of the home.


What if we decide after the home inspection that we don’t want to purchase the home? 

You get your Earnest Money back! No loss to you what-so-ever. If you decide after having your home inspection, that this isn’t the best investment or home for you, your earnest money is fully refunded, notification is provided to the seller and we move on!

What if I can’t obtain financing?

This one is a real bummer – if you received a fully underwritten pre-approval before your offer was accepted, you shouldn’t face this predicament. However if we have a financing contingency that hasn’t been waived, then you receive a full refund of your earnest money.

What if the house burns down a day before we purchase? What then?

You get your earnest money back! The home has to be in the same condition we saw it in when the offer was written.

I’m purchasing using a VA loan or Zero down AND my Closing Costs are paid by the seller. What happens to the earnest money if it isn’t used?

First off – congratulations. Secondly, your earnest money will be refunded to you at closing. Well done.

Do I have to have Earnest Money?

Yes – you have to have some form of an Earnest Money deposit. It could be as little as a dollar, with that said, I doubt the seller would accept that! It’s best to have at least 1% of the purchase price of the home.

What if I wake up the day before closing and decide that I don’t want to buy the home?

Well, this is one of the few circumstances that you would lose your earnest money. The seller (and you) have taken time, energy and resources to sell you the home. If after we have satisfied all of the home sale contingencies, the seller would rightfully receive your earnest money, for having taken the home off the market to sell to you.

More Resources

How to Purchase a Home With Your VA Loan

How to Purchase a Home With Your VA Loan

The VA Loan provides our military professionals an incredible opportunity to purchase a home with no down payment and competitive terms. You will learn what you need to qualify for a VA loan, the benefits of using your VA loan vs. an FHA or Conventional loan and myths about the VA loan.

read more
How To Finance Your Home Purchase

How To Finance Your Home Purchase

How do you finance your home purchase? There are different loan options and understanding the basics of each loan can help point you in the right direction. We highly encourage you to connect with a local, reputable lender in our area. Need a few recommendations? We have you covered.

read more

Get In Touch

Tacoma Realtor - Jenny Wetzel

Jenny Wetzel

Call or Text: 253.381.9788

Email: jenny@jennywetzelhomes.com

Fax: 253.381.9788