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!

< Older Post Newer Post >

Questions to Ask Before Hiring a Real Estate Agent

What Questions Should I Ask Before Hiring a Real Estate Agent?

By Dusty Rhodes • November 2, 2026

Know what to ask before hiring a real estate agent. Learn to evaluate experience, qualifications, local knowledge, marketing, and negotiation skills in Myrtle Beach.

Can I Negotiate Real Estate Commission Rates? Understanding Fee Negotiation

By Dusty Rhodes • October 19, 2026

If you're thinking about selling a home, you may be wondering: “Can I negotiate the real estate commission?” The short answer is yes, real estate commissions and agent compensation can be negotiable. But there's a lot more to the question than simply asking an agent to lower their fee. Before negotiating real estate commission rates, it's important to understand what you're actually negotiating, what services are included, how the compensation is structured, and whether a lower fee could affect the marketing, service, negotiation, or overall strategy you receive. As a Myrtle Beach real estate agent , I think homeowners should absolutely understand how real estate compensation works before choosing an agent. You should know what you're paying for, what services are included, and what you can reasonably expect from your agent. Here's what you need to know about negotiating real estate commission rates. Can You Negotiate Real Estate Commission? Yes. Real estate commissions are negotiable. There isn't one universally required commission rate that every real estate agent must charge. Compensation is something the parties can discuss and agree upon as part of the representation agreement. That means you can ask an agent: Is your commission negotiable? What services are included? What does your fee cover? Are there different service options? What marketing do you provide? How is buyer-agent compensation handled? Are there additional fees? What would change if I negotiated a different fee? Those are reasonable questions. In fact, I think homeowners should ask them. The important thing is to understand the entire value proposition rather than focusing exclusively on the percentage. Why Do Real Estate Agents Charge a Commission? Before negotiating a real estate commission, it helps to understand what the commission is actually paying for. A real estate agent's compensation can cover a significant amount of work before, during, and after the transaction. For a seller, that may include: Preparing a pricing strategy Performing a comparative market analysis Advising on property preparation Professional photography Marketing MLS exposure Digital advertising Social media marketing Showing coordination Buyer-agent communication Offer analysis Negotiation Inspection negotiations Appraisal issues Transaction coordination Communication with attorneys, lenders, inspectors, and other professionals Managing deadlines Problem solving Getting the transaction to closing And much of that work happens behind the scenes. The commission isn't simply a fee for putting a property on the MLS. How Much Is the Typical Real Estate Commission? There is no single standard real estate commission that every agent charges. Compensation can vary based on: The agent The brokerage The property The market The services provided The complexity of the transaction The agreement between the parties That's why you shouldn't assume that every Myrtle Beach real estate agent charges the same amount. You also shouldn't assume that two agents charging the same percentage are providing the same level of service. One agent may provide extensive marketing, professional photography, video, advertising, frequent communication, and hands-on transaction management. Another may offer a much more limited service model. The percentage alone doesn't tell you the whole story. What Does a Real Estate Commission Actually Pay For? This is one of the most important questions to ask. Instead of simply asking: “Can you lower your commission?” I'd recommend asking: “What do I receive for your fee?” For a seller, the answer might include: Pricing Strategy Your agent researches comparable properties and helps establish a pricing strategy based on the current market. Marketing Your home may be marketed through the MLS, online platforms, social media, photography, video, advertising, open houses, and agent-to-agent outreach. Negotiation Your agent helps evaluate offers and negotiate price and terms. Transaction Management Your agent helps keep the transaction moving after you accept an offer. Problem Solving When something unexpected happens, your agent helps you understand your options and communicate with the appropriate parties. Local Expertise An experienced local agent can provide insight into neighborhoods, buyer behavior, market conditions, and pricing that isn't necessarily obvious from an online home-value estimate. When you're comparing agents, these services matter. Can I Ask a Realtor to Lower Their Commission? Absolutely. There's nothing wrong with asking. A professional conversation might be: “Is there any flexibility in your compensation?” That's a reasonable question. However, you should also expect the agent to explain what their compensation covers and why they charge what they charge. If an agent agrees to reduce their fee, you should understand whether anything else changes. For example: Does the marketing change? Are professional photos still included? Is video included? Are advertising services reduced? Does the level of communication change? Are certain services no longer included? Is there a different service package? Does the agent's availability change? A lower fee isn't necessarily a problem. But you should know what you're getting in exchange. Should I Always Choose the Real Estate Agent With the Lowest Commission? I wouldn't. If you're selling a $500,000 home, the difference between two compensation structures may look significant on paper. But the real question should be: Which agent is most likely to help me achieve the best overall outcome? Suppose one agent charges slightly less but provides limited marketing and doesn't negotiate aggressively. Another agent charges more but has a strong marketing strategy, excellent communication, extensive local knowledge, and a proven ability to negotiate. The cheaper agent isn't necessarily cheaper in the end. A difference in sale price, concessions, repairs, or contract terms can potentially be much larger than the difference in the agent's fee. That's why I encourage sellers to look at net results and overall value , not just commission percentage. How Does Commission Negotiation Affect a Seller's Net Proceeds? This is where the conversation gets interesting. Let's say your home sells for $500,000. A lower commission rate may reduce the amount paid to your agent. But what matters to you as the seller is ultimately: How much money do I walk away with? For example, an agent who helps you achieve a stronger sale price, negotiate better terms, minimize unnecessary concessions, and avoid costly mistakes may create significantly more value than the difference between two commission rates. That's why I believe the better question isn't: “Who charges the least?” It's: “Who can provide the best overall value and help me reach my goals?” Can Real Estate Agents Offer Different Fee Structures? In some situations, agents may offer different compensation or service structures. The possibilities depend on the agent, brokerage, transaction, and services being provided. For example, an agent may structure services differently depending on whether the client wants: Full-service representation A more limited service arrangement Additional marketing Specialized marketing for a luxury property Different levels of advertising Other negotiated services The important thing is to get the agreement in writing so everyone understands exactly what is included. What About Buyer-Agent Compensation? This is an area that has changed significantly in recent years. Buyers working with a real estate agent generally enter into a written buyer representation agreement that addresses the agent's compensation. The amount and structure of that compensation should be clearly explained before you begin working together. In some transactions, the seller may agree to contribute toward the buyer agent's compensation. In others, the buyer may be responsible for some or all of it. The important point is that buyers should understand their agreement before making an offer , rather than assuming someone else will automatically pay their agent. If you're buying a home in Myrtle Beach, ask your agent: How are you compensated? What does our agreement say? What happens if the seller doesn't offer compensation? What would I potentially be responsible for? Can your compensation be negotiated? What services are included? These are all fair questions. Is Real Estate Commission Negotiable for Buyers Too? Potentially, yes. Buyer-agent compensation is addressed in the buyer representation agreement, and compensation can be negotiated between the parties. However, buyers should focus on the complete representation they're receiving. A buyer's agent may help with: Finding properties Market research Property analysis Neighborhood knowledge Offer strategy Contract negotiations Inspection negotiations Due diligence Appraisal issues Communication with the listing agent Transaction management Getting the buyer to closing Again, the lowest fee isn't automatically the best deal. What Should I Ask a Real Estate Agent Before Negotiating Commission? I f you're interviewing agents, I'd recommend asking these questions. 1. What is your compensation? Start with the obvious. You should know exactly what the agent is proposing. 2. What services are included? Don't assume every agent provides the same services. 3. What marketing will you provide? Ask specifically about: Photography Video MLS Social media Online advertising Open houses Email marketing Property websites Other promotional efforts 4. Are there additional fees? Ask whether there are any additional costs beyond the agreed compensation. 5. What happens if I negotiate a lower fee? If the agent offers a different rate, ask whether the services or marketing change. 6. How will you help me determine the right price? Pricing can have a major impact on the outcome. 7. How do you negotiate? Ask the agent how they approach offers, inspections, repairs, appraisal issues, and other negotiations. 8. How much experience do you have in my market? Local knowledge matters. Can I Negotiate a Real Estate Agent's Commission After Signing? This is where you need to be careful. Once you've entered into a written representation agreement, you shouldn't assume you can simply change the compensation whenever you want. Any changes should be discussed with your agent and properly documented according to the terms of your agreement and applicable law. That's why it's important to understand the agreement before you sign it. Don't be afraid to ask questions. If something isn't clear, ask your agent to explain it. Why Would a Real Estate Agent Agree to a Lower Commission? Every situation is different. An agent may consider factors such as: The expected sale price Property type Location Expected workload Marketing requirements Whether the client is buying and selling Multiple transactions Timing Complexity of the transaction But an agent also has real business expenses. Those can include: Brokerage fees MLS expenses Marketing Photography Signs Technology Insurance Licensing Vehicle expenses Advertising Administrative support Taxes And unlike a salaried employee, a real estate agent generally doesn't get paid simply for showing up. Compensation is tied to the transaction. That's something worth keeping in mind when evaluating a fee. Does a Lower Commission Mean Less Service? Not necessarily. Some agents may be willing to negotiate without reducing their service. Others may have different service levels or adjust what's included. That's why you should never assume. Ask. If an agent agrees to reduce their fee, ask: “Will anything about your marketing or services change?” Get the answer clearly understood before moving forward. What About Flat-Fee Real Estate Agents? You may also come across agents or companies advertising a flat fee instead of a percentage-based commission. This can sound attractive because you know the cost upfront. But once again, compare the entire service package . Ask: What exactly is included? Who handles showings? Who negotiates? Who handles inspections? Who communicates with the buyer's agent? Who manages the transaction? Is professional photography included? Is advertising included? What happens if the transaction becomes complicated? A lower upfront fee may be appropriate for some sellers. For others, full-service representation may provide more value. There's no one-size-fits-all answer. What I Would Look At If I Were Selling a Home If I were interviewing agents to sell my own home, I wouldn't make commission the first question. I'd want to know: 1. How would you price my house? 2. What is your marketing plan? 3. How will you get buyers' attention? 4. How well do you know my neighborhood? 5. How do you handle negotiations? 6. What happens when something goes wrong? 7. How will you communicate with me? 8. What exactly is included in your compensation? 9. Are there additional fees? 10. What do you believe you can do for me that another agent can't? Then I'd look at the compensation. That's because I want to know what I'm getting before deciding what I'm willing to pay. Real Estate Commission Negotiation in Myrtle Beach The Myrtle Beach real estate market has its own set of considerations. The Grand Strand isn't one single market. There are major differences between: Myrtle Beach North Myrtle Beach Carolina Forest Conway Surfside Beach Murrells Inlet Socastee Market Common Grande Dunes Barefoot Resort Golf communities Intracoastal Waterway communities Oceanfront and second-home properties The type of property you're selling can also affect the marketing strategy. Selling a primary residence in Carolina Forest isn't the same as selling an oceanfront condo. Selling a luxury home isn't the same as selling an entry-level property. That's why I believe compensation should always be considered alongside the specific strategy and service you're receiving. The Real Question Isn't “Can I Get a Lower Commission?” Yes, you can ask. But I'd encourage you to take the conversation one step further. Instead of asking only: “Can you lower your commission?” Ask: “What value am I getting for your fee?” That's a much better conversation. Because ultimately, your goal isn't to hire the cheapest real estate agent. Your goal is to make the best financial decision possible. For a seller, that means looking at the entire transaction: Sale price + negotiation + marketing + terms + service + expenses = your overall result. And for a buyer: Representation + negotiation + guidance + market knowledge + transaction management = the value of your agent. My Perspective as a Myrtle Beach Real Estate Agent I've been in the real estate business for more than 10 years, and one thing I've learned is that every client and every transaction is different. I don't expect someone to hire me simply because I'm an agent. I expect them to ask questions. I want clients to understand what they're paying for, what services I provide, how I approach the market, and what I believe I can do for them. And if someone wants to discuss compensation, I'm happy to have that conversation. I think that's how it should work. At the same time, I don't believe the lowest commission automatically equals the best deal. If I'm selling your home, my goal isn't just to get it listed. It's to help you develop the right strategy, attract qualified buyers, negotiate effectively, navigate the transaction, and ultimately get you to the closing table with the best overall outcome I can reasonably help you achieve. Frequently Asked Questions About Real Estate Commission Negotiation Can you negotiate real estate commission? Yes. Real estate compensation is negotiable, and the specific terms should be discussed and documented in the applicable representation agreement. What is a reasonable real estate commission? There isn't one universally required commission rate. Compensation varies based on the agent, services, transaction, property, and agreement between the parties. Can I negotiate my Realtor's commission? You can ask whether the agent is willing to negotiate their compensation. If changes are agreed upon, make sure you understand what services are included and get the terms in writing. Should I choose a real estate agent based on commission? I wouldn't recommend choosing an agent based solely on commission. Consider experience, local knowledge, marketing, communication, negotiation skills, service, and overall value. Can buyer-agent compensation be negotiated? Yes. Buyer-agent compensation is addressed through the buyer representation agreement and can be negotiated. Buyers should understand exactly what they may be responsible for before entering into an agreement. Can a seller negotiate what they pay toward buyer-agent compensation? The seller and buyer can negotiate transaction terms, including whether the seller is willing to contribute toward the buyer's agent compensation, where permitted and agreed upon. What should I ask before agreeing to a real estate commission? Ask what services are included, how the property will be marketed, whether there are additional fees, how negotiations are handled, and whether anything changes if the compensation is adjusted. The Bottom Line: Can You Negotiate Real Estate Commission Rates? Yes, you can negotiate real estate commission rates and agent compensation. But don't stop at the percentage. Ask what you're actually receiving for the fee. Compare agents based on: Experience Local market knowledge Marketing Communication Negotiation Service Transaction management Problem solving Overall value A lower commission may save you money. But the right agent may also help you make more money, avoid costly mistakes, negotiate better terms, and navigate problems that could otherwise cost you significantly more. The goal shouldn't be to pay the lowest possible fee. The goal should be to get the best overall value for the money you're paying. If you're thinking about selling a home in Myrtle Beach, Carolina Forest, North Myrtle Beach, Conway, Surfside Beach, Murrells Inlet, or anywhere along the Grand Strand , I'd be happy to sit down with you, explain how I approach the sale, and answer your questions about compensation and services. You don't have to make a decision simply because we talk. You should have enough information to decide whether I'm the right agent for you.

What Does a Real Estate Agent Actually Do? | Myrtle Beach SC

By Dusty Rhodes • October 5, 2026

What does a real estate agent actually do? Learn the responsibilities of a buyer's or listing agent and how a Myrtle Beach REALTOR® helps from start to closing.