A Homebuyer’s Guide To Earnest Money

Dusty Rhodes • April 10, 2023

Earnest money may not be the most well-known component of a home purchase, but it’s nonetheless an important one. The aptly named “good faith” payment is an important reminder that the real estate industry is not immune to negligence or malicious activity. More importantly, however, it provides a relative system of checks and balances which attempts to hold buyers and sellers to their word. Though small, a good faith deposit carries large implications, which begs the question: What is earnest money? Better yet, how can buyers navigate their own earnest money deposits and protect their financial interests?


What Is Earnest Money?

Earnest money is a deposit made on behalf of prospective homebuyers to express their sincerity in following through with a purchase. Otherwise known as a good faith deposit, earnest money is essentially a safety measure put in place to protect sellers after each side of a real estate transaction enters into a purchase agreement. If for nothing else, the seller needs some reassurance that the buyer will follow through with the purchase. In return for taking the home off the market (and risking a financial hit), the buyer will provide an earnest money payment which is typically equal to 1% – 3% of the sale price. As a deposit, the payment is held in an escrow account until the deal is complete. Upon closing the deal, the seller will return the cash to the buyer. If the deal falls through, the seller is entitled to keep the money if the previously agreed upon criteria are met.


How Earnest Money works

More often than not, the cash is delivered to sellers when the impending buyer signs a purchase agreement. At that time, the seller will pull the home off the market and take on financial risk, so it’s only fair that that buyer puts some “skin in the game.” That said, there’s no reason prospective buyers couldn’t include the funds with their initial offer. In a market as competitive as today’s, the addition of cash with an offer could go a long way in beating out the competition. Those considering including a good faith payment with the offer to make it look more attractive will want to put up enough money to seem serious, but not so much as to put excess capital at risk.


Including an earnest money deposit with an offer will show sincerity, but it can also be a bit premature. If for nothing else, the seller will typically want to be included in the negotiations, which set the terms of the good faith payment. As a result, terms are usually discussed at the time the purchase agreement is signed. The terms will determine how much of a good faith payment will be deposited and the terms which will unlock it from escrow. Terms will include contingencies that allow the buyer to get the money back if they don’t buy the home. For example, a buyer may receive their deposit back if the home doesn’t pass inspection.


Once the seller receives the deposit, the earnest money is transferred into an escrow account, where it is held until the criteria which unlock it is met. Since the purchase agreement is contingent on several things, it does not obligate the buyer to follow through with a purchase. Still, the contract will require the owner to take the home off the market while it’s appraised and inspected. The owner may be losing out on subsequent offers in that time, so the earnest money serves as a bit of a safety net.


If the buyer pulls out of a transaction, the seller will most likely be able to keep the cash. There are extenuating circumstances that will enable the buyer to recoup their deposit, but those terms are unique to each contract. If the buyer can follow through with the transaction, the cash may be applied to the down payment and closing costs.


Example Of Earnest Money


Let’s say, for example, Louise has finally saved up enough money to place a down payment on her first house, and she’s ready to make the leap to homeownership. Over the course of looking for a house, she stumbles across the perfect property in a neighborhood she has always dreamed of living in. At $100,000, the house is within her budget, so Louise decides to make an offer. Thanks to a well-written offer letter, the homeowner agrees to sell to Louise and enters into a purchase agreement.


When the agreement is signed, the owner is required to take the home off the market so it may be inspected and appraised. Louise agrees to negotiate an earnest money deposit in return for the financial risk being placed on the homeowner by taking their home off the market.


The negotiations require Louise to pay an earnest money deposit of 1.0% (or $1,000). The terms also state that Louise will get her money back if the deal falls through because of a failed inspection or the appraisal brings up some red flags. Finally, the homeowner will keep the deposit if Louise doesn’t follow through on the purchase.


With the terms set, Louise pays the earnest money deposit with a wire transfer directly into an escrow account that is held by the real estate brokerage dealing with the transaction. The money will sit in the escrow account until the agreed-upon terms unlock it. Fortunately for Louise’s sake, the home passed inspection, and the appraisal was what she expected. Louise closed the deal when all was said and done and applied the money to the closing costs she incurred. In the end, Louise got the house she always wanted, and the seller got the peace of mind they needed.


How Much Earnest Money Is Enough?


To be clear, there’s no universal rule for exactly how much to offer as an earnest money deposit. Instead, the amount of cash prospective buyers should offer is directly correlated to the current state of the real estate market. A slow market without much competition, for example, poses less of a risk to sellers who take their homes off the market when a purchase agreement is signed. As a result, the earnest money won’t need to be a significant amount. On the other hand, a competitive market implies the seller will miss out on multiple offers when they take their home off the market. Therefore, it’s only fair that the deposit is increased in active markets. While most earnest money deposits will rest somewhere in the neighborhood of 1% – 3% of the sale price, it’s entirely possible the amount increases in more competitive markets.


Does Earnest Money Get Refunded?


Earnest money may be refunded to a buyer when agreed upon contingencies are met. With that in mind, here’s a list of the most common reasons earnest money may be refunded:

  • Home Inspection Contingency: Cash may be refunded to the buyer if the contract includes a home inspection contingency and the subject property fails the inspection. If for whatever reason, the inspection is to blame for the buyer backing out of the deal, the home inspection contingency may result in a refund of the earnest money.
  • Appraisal Contingency: An appraisal contingency helps protect buyers from homes which are overvalued. Therefore, if an appraisal comes in well below the sales price, the buyer may withdraw from the purchase and receive their earnest money in full.
  • Financing Contingency: In the event a buyer never receives approval for financing, a financing contingency may allow them to get their earnest money deposit back when they pull out of a deal.
  • Existing Home Contingency: Some contingencies are subject to the sale of an existing home. This particular contingency states that a buyer may back out of a deal if their current home does not sell, depriving them of the funds necessary to make a subsequent purchase. If that’s the case, the buyer may also get their earnest money back.


Can A Seller Keep Earnest Money?


A seller may keep earnest money if any of the terms in the purchase agreement are broken. More specifically, however, the purchase agreement will outline the terms of the earnest money deposit. As a signed agreement, the prospective buyer is obligated to follow the terms which were agreed upon by each party. Therefore, if the buyer breaks any of the terms they agreed to adhere to, the seller is entitled to the deposit. If, for example, the buyer pulls out of a deal for no reason at all, the seller can keep the earnest money they are owed (as long as the terms say as much).


How To Protect Your Earnest Money


Protecting earnest money has more to do with following the terms of a purchase agreement than anything else. It is the terms of the agreement which will serve as the basis of protection. With that in mind, however, the best way to protect your money is to write up an air-tight contract that gives buyers the greatest odds to recoup their money in the event unexpected circumstances occur.

Contracts aren’t going to write themselves, which means buyers need to know what to include. Here’s a list of the steps buyers can take to protect their earnest money deposits:

  • Put the money in an escrow account
  • Include contingencies in the purchase agreement
  • Follow the terms of the purchase agreement
  • Make sure everything is in writing


1. Use An Escrow Account


Every purchase agreement should include a detailed account of where earnest money will be held. While most earnest money deposits are held in an escrow account, it is possible to hold it with a title company or legal firm. Nonetheless, any good faith money must go through an account controlled by an unbiased third party. The real estate market isn’t immune to fraud, and enlisting the services of a third-party account will go a long way in securing each party’s capital.


Typically, the buyer will pay by one of three methods: certified check, wire transfer, or personal check. Whichever method is used, the payment should be made out to the third-party account; that way, they can distribute the funds whichever way the purchase agreement dictates.

2. Understand Your Contingencies


Protecting earnest money starts and ends with the purchase agreement. However, it’s not enough to understand the terms agreed upon. Buyers need to negotiate for the terms they want to see in the purchase contract. Of course, that starts with knowing what contingencies may be included in a purchase agreement. Therefore, buyers will want to research all of the contingencies that give them the best odds of getting their money back and try their best to get them into the contract.


In addition to adding contingencies, buyers need to understand exactly what they mean. Only when a buyer is fully aware of what each contingency requires will they be able to truly protect their deposit. It isn’t until a buyer knows how to meet their obligations that they’ll be able to tilt the odds in their favor.

3. Don’t Miss Your Deadlines


A large part of protecting an earnest money deposit has to do with adhering to deadlines. Buyers who do what they say within the allotted time frame and follow the terms of the purchase agreement are the only ones who stand a chance of getting their money back. Therefore, work within the rules of the contract and do not miss deadlines if you ever want to see your earnest money again.


4. Put Everything In Writing


Again, it all comes down to the purchase agreement. The purchase agreement represents a contract between buyers and sellers and outlines exactly how the earnest money will be dealt with. As such, everything buyers and sellers negotiate pertaining to the good faith payment will need to be included in the purchase agreement. Anything left off the agreement means nothing, so do not simply “shake on it” or take anyone for their word.


Summary


What is earnest money, if not for a promise on behalf of buyers that they intend to see the purchase of a home through to the end? Of course, in its simplest form, earnest money is essentially a down payment that divulges a buyer’s intentions. However, at its pinnacle, an earnest money deposit is a contract between two parties that facilitates honest transactions. When terms are followed, earnest money can simultaneously help buyers in a competitive market and give sellers the peace of mind they need to accept an offer.

Source: Keeping Current Matters


Dusty Rhodes Properties is the Best Realtor in Myrtle Beach! We do everything in our power to help you find the home of your dreams. With experience, expertise, and passion, we are the perfect partner for you in Myrtle Beach, South Carolina. We love what we do and it shows. With more than 22 years of experience in the field, we know our industry like the back of our hands. There’s no challenge too big or too small, and we dedicate our utmost energy to every project we take on. We search thousands of the active and new listings from Aynor, Carolina Forest, Conway, Garden City Beach, Longs, Loris, Murrells Inlet, Myrtle Beach, North Myrtle Beach, Pawleys Island, and Surfside Beach real estate listings to find the hottest deals just for you!

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How to Move Out After Selling a House

By Dusty Rhodes • October 13, 2025
From the first coat of paint you used to freshen up your house’s trim to the stress of wrangling your way to a deal, you’ve been through a lot in that place. Now you’ve made it to the final hurdle of selling a home: moving out! Don’t worry, this is the easy part… but you want to do it right. Here’s how to get through the last leg of your journey without any bumps along the way. How to move out on time Once the paperwork is signed at closing, the buyers will officially own the house—and you won’t. That means that, technically, if you or your stuff is still there after the close, “the buyer could evict you,” says Joshua Jarvis , founder of Jarvis Team Realty in Duluth, GA. So make sure to have your exit strategy in place! Still, most buyers will understand if you need a bit more time and have a legitimate reason—like if you can’t move until the weekend due to your work schedule. Just be sure to discuss these issues as soon as possible before the close, so your buyers can plan accordingly. Decide what to leave behind To make sure you’re leaving behind everything the buyer wanted—and that you agreed to—double-check the closing documents . There should be an itemized list of what comes with the house . And even if the buyers didn’t formally request them, it’s just good form to leave certain types of things behind. Such as? “Generally speaking, you should leave anything that’s bolted to the wall,” says Jarvis. “Some homeowners want to take their fans and blinds to the next home, but generally if it’s screwed in, it stays.” Also, if you and the buyers agreed to transfer any services—such as alarm monitoring or pest control —be sure to set that up before you go. Leave the buyers a detailed note in the house, or ask your agent to get in touch with theirs to make sure the transfer goes smoothly. If you do inadvertently take an item that the buyers had requested, they have the right to ask for it back—and they could potentially sue you in civil court for the cost of a replacement. So, when in doubt, feel free to check with the buyers before you grab and go. But don’t leave anything else behind Just as important as what you leave behind is what you don’t. Your buyers have a right to move into a home that’s been cleared of furniture and other movable items they didn’t expressly request. “Some folks leave all kinds of unwanted clothes, furniture, paint cans, and other items, thinking they are helping the buyers,” Jarvis says. If you truly think your buyers might love to have your old planting pots or kiddie equipment, go ahead and ask—but please don’t assume they’ll welcome your leftovers. Even if you’re careful, you might forget something—at which point the buyers may contact their agent to get it back to you, but they also have the legal right to just keep or get rid of it. So double-check areas (e.g., the attic, garage, basement, storage shed, kitchen, and bathroom drawers) where people commonly overlook items. Clean up It’s common courtesy to leave the place not only clear of your possessions but also clean. However, that doesn’t mean you have to leave it immaculate. “Generally, you shouldn’t have to pay to have it deep cleaned,” Jarvis says. In most cases, a simple broom-clean will do. That means wiping down the countertops, cleaning out drawers, sweeping or vacuuming all the floors, and giving the bathroom and kitchen appliances a once-over so the new owners aren’t grossed out when they arrive. Are you forgetting anything? Before you close the door for the last time, run through a quick checklist. Did you eyeball every room for stray items? Have you forwarded your mail and turned off the utilities? Is the water running in the jacuzzi? We all get in a bit of a rush even in the best planned moves, but you won’t be able to get back in, so it can’t hurt to do a final run-through before you move out. Once you’re ready, it’s time to leave. You can drop a line to your real estate agent to let them know you’re out, although it’s usually a courtesy more than a necessity. If you’re feeling truly gracious, feel free to leave a note, card, or bottle of bubbly congratulating the people who’ve inherited your former home. Given all the fond memories you’ve built between those walls, wouldn’t it be nice to start the home’s new owners off on the right foot? And buy yourself some Champagne, too. Make it the good stuff—you’ve earned it. 

When Are You Considered a First-Time Homebuyer Again?

By Dusty Rhodes • October 6, 2025
Buying a home is an exciting time, whether this is your first time purchasing a house or you’re a repeat buyer. But if you’ve owned a home before, you may be wondering if you can be a first-time home buyer again. In some cases, yes, you can. In this Redfin article, we’ll go over what qualifications you need to meet and when you can be considered a first-time homebuyer again. Whether you’re buying a home in Atlanta, GA , or a condo in Portland, OR , read on to find out if you’re eligible to be a first-time homebuyer twice. Key takeaways Usually, you’re a first-time homebuyer again if you haven’t owned a home in 3 years. Some special situations may also qualify you as a first-time buyer. Benefits include down payment and closing cost assistance and lower interest rates. When are you considered a first-time homebuyer again? Typically, you’re considered a first-time homebuyer again if you have not owned a primary residence for at least three years. There are several additional reasons you may qualify as a first-time homebuyer again, which we’ll explore below. Some first-time homebuyer programs have different definitions of “first-time homebuyer,” so check with the specific program before proceeding. Qualifications to be considered a first-time homebuyer There are other reasons you may qualify as a first-time homebuyer twice. Let’s take a look at them: You haven’t owned a primary residence for 3 years: This means if you owned a home, but sold it and rented for 3 (or more) years, you can be considered a first-time home buyer again. If you’re buying with another person, only one of you needs to meet the criteria to use most first-time home buyer programs. You’re a single-parent buying on your own: If you’ve never purchased a home by yourself and are a divorced single-parent, you may qualify again. Even if you purchased a home with your former spouse, you likely still meet the criteria. You’re a displaced homemaker/family caregiver: If you are a displaced homemaker who doesn’t or didn’t earn wages from employment and has only owned a home with a former spouse, you’re likely considered a first-time homebuyer. You previously owned a mobile home: If you owned a mobile home or property not affixed to a foundation, then you likely qualify. Your previous home was out of compliance: If your home had building code violations or safety issues that could not be repaired or brought into compliance for less than the home’s value, you’re likely eligible. Benefits of being a first-time homebuyer again There are benefits to being a first-time homebuyer twice. Let’s take a look at them: Access to first-time homebuyer programs: One of the biggest benefits is the ability to use first-time homebuyer programs such as down payment and closing cost assistance , grants, credits, or loans. Every program has different qualifications, so make sure to research each program or speak with your agent and lender to explore options. Options for low down payment mortgages: There are several loans available for first-time buyers that offer lower down payment amounts. For example, Freddie Mac’s Home Possible and Fannie Mae’s Home Ready offer down payment amounts as low as 3%. Potentially lower mortgage rates: Sometimes, lenders will offer slightly lower mortgage rates to first-time borrowers to help them buy their first home. FAQs about first-time homebuyers Can I be a first-time homebuyer again if I previously owned a home? Yes, as long as you haven’t owned a primary residence in the last 3 years, or you owned a home while previously married. Do both homebuyers need to be first-time homebuyers to qualify? No, in most cases, as long as one homebuyer meets the qualifying criteria, then you’re considered a first-time homebuyer. However, some programs require both homebuyers to be first-timers. Can I qualify for a first-time homebuyer loan again? Yes, for the most part, if you qualify as a “first-time homebuyer,” you can get another first-time homebuyer loan. Every lender and loan is different, so be sure to read the eligibility criteria thoroughly. Are there income limits for programs? Yes, many first-time homebuyer programs have income limits. This means you won’t qualify if you make more than the specified annual amount.

10 Home Renovation Projects Under $1,000 That Add Lasting Value

By Dusty Rhodes • September 29, 2025
Enhancing your living space doesn’t always require a hefty budget. With the right updates, you can add real value to your home for under $1,000. Whether you’re preparing to sell your home in Grand Rapids, MI , or looking for some easy DIY projects for your house in Portland, OR , these cost-effective upgrades can breathe new life into your space. To dig deeper into this topic, we spoke with Kevin Brasler, executive editor at nonprofit Consumers’ Checkbook , a consumer advocacy group that helps homeowners save money and make smart choices. With decades of experience evaluating service providers, Kevin shares insights on how to budget wisely, avoid common renovation mistakes, and know when to hire a professional versus taking the DIY route. 1. Add fresh paint to the walls of your home Painting is one of the most affordable ways to refresh your home. A gallon of quality paint costs $30 to $50, with a full room averaging around $350 . Neutral shades like gray, beige, or white appeal to most buyers, while accent colors such as navy, forest green, or mustard add personality. For a calming vibe, try sage or powder blue. Brasler notes that painting is one of the best DIY-friendly projects homeowners can take on. “Good DIY projects are those that involve mostly labor: painting, basic tile work, installing fixtures that don’t require new wiring or plumbing, landscaping, and most flooring jobs,” he says. 2. Update your cabinet hardware A cabinet hardware update is a subtle yet effective strategy to elevate your home’s functionality and aesthetic appeal. Swapping outdated or generic cabinet handles and knobs for modern, stylish alternatives instantly transforms kitchens and bathrooms. Consider sleek brushed nickel handles for a contemporary touch, or opt for vintage-inspired brass knobs for a timeless charm. This modest investment typically costs between $2 to $10 per piece. 3. Change the kitchen backsplash A new backsplash can quickly refresh your kitchen while protecting your walls. A custom kitchen backsplash protects your walls from daily wear and creates a focal point that elevates the entire room. Opt for affordable ceramic or glass tiles, which can be found for as low as $1 to $5 per square foot. Staying within a $1,000 budget for a standard-sized kitchen is doable with those materials. Or you can go for a peel-and-stick backsplash that is not only budget-friendly, but a quick solution to make your kitchen stand out. Brasler stresses that getting multiple estimates is critical for even small-scale projects like this. “The biggest mistake homeowners make is not getting multiple bids. Even for smaller projects, you should get at least three written estimates; five is better,” he explains. 4. Switch to energy-efficient lighting By making the switch to energy-efficient lighting, you’ll not only improve the sustainability of your home but also create a more comfortable and inviting living environment. Switching to LED bulbs, which typically cost between $2 to $10 each, saves energy and reduces utility bills over time. Beyond the financial benefits, the crisp and vibrant illumination of energy-efficient lighting can effortlessly enhance your home’s overall mood and appeal. 5. Create a beautiful landscape A simple landscaping update is another low-cost project that adds value. Try planting vibrant flowers, shrubs, and trees, which can cost anywhere from $100 to $500, depending on the size and variety. Add mulch or decorative stones to create a polished look for approximately $50 to $150, while adding affordable outdoor lighting options typically range from $50 to $200. Low-maintenance features lower costs down while still making a strong impression. For most landscaping updates, DIY is both practical and cost-effective. Still, Brasler advises calling in professionals for anything involving gas, high-voltage electrical, or structural work. 6. Install a smart thermostat A smart thermostat, such as popular models like Nest or Ecobee, typically costs between $150 to $300, depending on the brand and features. Homeowners can often handle the installation themselves, avoiding additional labor costs. Once installed, these intelligent devices learn your preferences, allowing for automated temperature adjustments, and can be controlled remotely via smartphone apps. 7. Refurbish or paint the front door Refresh your curb appeal by refurbishing or painting the front door – a low-cost project with instant impact. Sanding and restaining often costs under $100 and requires just a few materials. Another choice is to use high-quality exterior paint, which typically ranges from $30 to $50 per gallon, providing a fresh, vibrant color that suits your home’s style. 8. Add floating shelves or built-ins Consider adding floating shelves or built-in storage solutions to maximize space and keep your home organized. Floating shelves, available for as little as $20 to $50 per shelf, provide an affordable and stylish way to showcase decor or organize essentials. For a more customized approach, DIY built-ins can be crafted using plywood or ready-to-assemble shelving units, typically ranging from $100 to $300. 9. Upgrade your kitchen sink and faucet Breathe new life into your kitchen with a sink and faucet upgrade. Faucets usually run $100 to $300, and sinks $200 to $500. Consider a sleek pull-down faucet and a resilient stainless steel or granite composite sink to improve both function and style. Spending $300 to $800 on a sink and faucet upgrade can instantly refresh your kitchen’s look and make daily tasks easier. 10. Add safety measures to protect your home Smart security cameras or a basic surveillance system now offer affordable and effective protection. Investing in a home surveillance system, typically from $200 to $500, allows real-time monitoring and deterrence against potential threats. The addition of smart cameras, with features like motion detection and remote access via smartphone apps, can improve your home’s overall safety and convenience. With a budget-conscious investment of $500 to $1,000, you can create a comprehensive security network covering critical areas of your property. Tips for finding good contractors Even for smaller projects, working with contractors requires careful planning. Brasler emphasizes the value of comparison shopping. “Get proposals and detailed pricing from at least three reputable, licensed contractors,” he advises. “The only way to ensure you’re paying a fair price is to initiate competition.” He also suggests: Check references thoroughly. Ask questions like: Did the company follow plans? Did it finish on time? Was the work professional? Did the contractor offer low-cost solutions and stick to agreed prices? Were problems handled promptly and effectively? Did the team communicate clearly throughout the project? Was disruption to your daily life kept to a minimum? Did the finished results meet your expectations for quality and appearance? Was the contractor flexible and fair about changes if you adjusted plans? Ask neighbors and friends for referrals. Word-of-mouth often uncovers the best local contractors. Look for complaints. Check ratings at Checkbook.org or your local Better Business Bureau and be cautious with online reviews as they can’t always be trusted. Common mistakes when budgeting for small renovations Brasler states the biggest budgeting mistake is skipping multiple bids. “A contractor charging $800 might be using premium materials while the $500 bid uses builder-grade stuff. Try to get prices from each business for the exact same work,” he explains. He also reminds homeowners not to assume that a low price means low quality. “For decades we have evaluated all kinds of businesses and often find some of the best companies have the lowest prices,” he says. When to DIY vs. hire a pro While DIY saves money, Brasler stresses knowing your limits. “Call in pros to deal with anything involving gas, high-voltage electrical, or structural changes. Ditto for work that requires a permit and inspection,” he advises. For tasks like painting, basic landscaping, or adding shelves, homeowners can usually manage on their own. Keep expectations realistic since DIY projects often take longer and may not match professional results. The bottom line Budget-friendly renovations under $1,000 can make a big difference in your home’s look, comfort, and value. From painting and landscaping to updating fixtures and adding smart technology, these projects prove you don’t need to overspend to refresh your space. As Brasler reminds homeowners, “the key is balancing creativity with caution.” By comparing bids, avoiding common budgeting mistakes, and knowing when to call in the pros, you can achieve lasting results without stretching your wallet.