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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What Stays With the House When You Move?

By Dusty Rhodes • March 30, 2026

When you’re selling your home , it is natural to assume that anything you can safely remove is yours to keep—like the light fixtures you painstakingly cleaned and repaired, or the appliances you bought last year. But the truth is, the buyer may want some of those items, too, and sometimes it's better to part ways with these items for the sake of the sale. Rather than keep everything, you should decide what you'd like to keep and what you'll leave behind as a way to entice buyers into making an offer, particularly in today's market where buyers are holding more of the cards than ever. What stays with the house? Generally, certain items stay with the house when you sell and move. Some features may seem obvious, but the truth is, you're probably expected to leave more behind than you think. Some of these items can include: Built-ins: Built-in bookshelves, benches, and pull-out furniture generally stay inside the home. Landscaping: Trees, shrubs, and any flowers planted in the ground should stay in the yard. Wall mounts: If you have TV wall mounts or picture mounts that might damage the wall if you remove them, it is a good idea to leave them in place when you move. Custom-fit items: If you have custom-made curtains , plantation shutters, or blinds, leave them on the windows and doors. Hardware : If you upgraded the knobs and drawer pulls in the bathrooms and kitchen, you should either leave those behind or install replacements before you move. Alarm systems : Wireless alarm systems are designed to be removed. Otherwise, leave the alarm monitoring station attached and either relocate or cancel the monitoring service. Smoke detectors : Smoke detectors and sprinkler systems should stay in the house, especially if you plan to move before selling the house. What can you take? While you’re expected to leave some items behind, in general your belongings are yours to keep. Here are some examples: Patio furniture, lawn equipment, and play sets : If you have a wooden swing set in the backyard and a bistro table on the front porch, take those items with you. Appliances : Some lenders require that a home have an oven installed before approving a loan, but for all other appliances, it's up to you to decide what you will take and what you will offer as part of the home. Some light fixtures : Generally, homeowners leave light fixtures behind, but if you’re attached to a certain fixture, you can make arrangements with the buyer to take it. Built-in kitchen tools : If you can safely remove a mounted spice rack or the pasta arm, you can take it with you. Rugs, basic curtains, wreaths : Small decor items like rugs or curtain rods that can be safely removed can be taken. What should you consider leaving? Some of your personal items can be used to help sell your house—or increase the asking price. Before you take everything just to take it, consider offering some hot items like the following: Appliances : Homeowners, especially new homeowners, don’t always have their own appliances. Many buyers would be more likely to place an offer on a home if it came fully stocked with appliances. Custom swing and play sets : If you have a swing set or playhouse your children have outgrown and you notice a potential buyer has children, offer to include the item with the deal. Kitchen built-ins : Built-in spice racks, pantry organization, and windowsill shelves can really help sell a kitchen. Consider offering the items to an interested buyer. Light fixtures, curtains, rugs, and other upgrades : If you’ve upgraded the light fixtures or have custom rugs in the entryway, a buyer may be willing to increase his or her offer to keep those items in the home. If you’re not sure what would entice a buyer, ask your real estate agent to provide suggestions. Don't have an agent yet? Here's how to find a real estate agent in your area.

Top Mistakes Homeowners Are Making in 2026 (And How To Avoid Them)

By Dusty Rhodes • March 23, 2026

Let’s be clear: selling your house is absolutely possible right now. According to the National Association of Realtors (NAR), roughly 11k homes sell every day in this country. And the sellers who are making their moves happen all have one thing in common: they’ve adjusted their strategy to match today’s market. They’re realizing inventory has grown. Homebuyers are more selective. And buyer expectations are higher. The sellers who struggle are usually approaching today’s market with yesterday’s expectations. Here are the three biggest mistakes they’re making – and how to avoid them. 1. Pricing Based on What Their Neighbor Got a Few Years Back Setting your price is the most important decision you make when you sell – and the one that’s most often mishandled. Realtor.com data shows almost 1 out of 5 sellers in 2025 had to drop their price. Here’s what those sellers went wrong. Buyers have more choice and more negotiating power now that inventory has grown. And house hunters will actively avoid your house is if feels like it’s priced too high. That’s why overpricing usually leads to: Fewer showings Less competitive (or lowball) offers Longer time on market And all three of those side effects are things you don’t want to deal with. What To Do Instead: The good news is the cure is simple. Just price for today’s buyer, not yesterday’s headlines. Lean on your agent’s knowledge of recent comparable sales, current competition, and local buyer behavior to land in the value “sweet spot” that drives traffic and urgency from day one. 2. Trying To Skip Repairs That Buyers Now Expect A few years ago, you could sell as-is and still get well above asking. Today? Not so much. Right now, NAR says two-thirds of sellers are making at least some repairs. And the reason why is simple. In a market with more inventory, buyers compare homes side by side. Homes that don’t show well (or feel dated) are going to lose attention quickly, even if the issues are minor. What To Do Instead: Ask your agent which high-impact, low-stress updates they’d recommend for your house. The goal isn’t perfection. It’s helping buyers see themselves moving in without a mental to-do list. Small investments in staging, repairs, and curb appeal can make a huge difference in how quickly offers come in – and how strong those offers are. 3. Playing Hardball When Buyers Try To Negotiate Today’s buyers have housing affordability at the top of their minds. And since money is already tight, they’ll be pickier and will probably ask for some compromises from you. Whether that’s making repairs, giving them a credit at closing, or taking just a few thousand dollars off your asking price, negotiating is normal again. So, if something pops up in the inspection, you’re going to need to be open to talking about it. If you’re not, you may very well see your buyer walk away. And some sellers are figuring this out the hard way. Redfin data shows one of the big reasons home sales fell thru in 2025 was inspection or repair issues. Odds are those homeowners weren’t willing to flex a bit to get the deal done. What to Do Instead: Meet with your agent to make sure you understand what buyers in your area care the most about. Align your price with value, present the home clearly and confidently, and stay open to reasonable negotiations that keep deals moving forward.

10 Aging-in-Place Features Pros Swear By

By Dusty Rhodes • March 16, 2026

They’re often called aging-in-place features, but things like curbless showers, nonslip flooring and wide walkways and doorways can benefit everyone, no matter their age or ability. “Regardless of aging in place, there is a place for these in day-to-day life, whether it be a teenager on crutches, a family member having had surgery, active kids,” designer Dana Bass says. “It’s not just about aging in place. We’ve got to account for unplanned life emergencies.” Designer Tammy Battistessa of Ellaire Kitchen & Bath Design agrees. “Whenever possible, I include aging-in-place and universal design features in every project, as I believe many of these features benefit clients of all ages and abilities, in addition to allowing a client to safely remain in their home for a longer period of time,” she says. Creating a home that can adapt also makes it more sustainable. “Aging in place is a key element to making legacy homes that can evolve over time,” architect Tim Barber says. With all that in mind, we asked more than 50 home design and construction professionals to share the aging-in-place features they always recommend. Here are the 10 that came up again and again. 1. Wide Walkways and Doorways Planning ahead is one of the most important steps when incorporating aging-in-place features. Many of these elements require thoughtful design and construction, so it’s wise to start early — and to consider hiring professionals who understand the nuances. “Thinking through how you will really use the space makes all the difference,” designer Haiku Durden of HDS Design says. “Having a designer involved really makes a difference.” A professional can help you create a plan that works for your current needs and anticipates future ones. “We currently default to aging-in-place features when our clients are near retirement or retirement age,” says designer Jenny Guggenheim of Guggenheim Architecture and Design Studio . “Preplanning by adding blocking behind the wall finish, spacious floor planning to allow for wheelchair or walker use.” In fact, spacious layouts are among the most commonly recommended aging-in-place strategies. Wide walkways and doorways — and generous clearances around furniture and fixtures — make it easier for anyone to move through the home comfortably. Installing a continuous flooring material throughout also reduces tripping hazards caused by changes in height or texture between rooms.