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 Stage Your Outdoor Space to Sell Your Home Faster

By Dusty Rhodes • June 8, 2026

When preparing to sell your home , the outside matters just as much as what’s inside. Learning how to stage your outdoor space to sell can help create a memorable first impression, boost curb appeal, and make buyers feel emotionally connected before they even walk through the front door. From refreshing landscaping to creating cozy gathering areas, thoughtful outdoor staging can help your home stand out in a competitive market. In this Redfin guide, we’ll share expert-backed tips for transforming your yard, patio, porch, or garden into a space buyers can easily picture themselves enjoying. Whether you’re preparing a bungalow in Boise, ID , or listing a modern home in Savannah, GA , these outdoor staging ideas can help sellers create inviting spaces that feel polished, functional, and move-in ready. Why outdoor staging matters when selling a home Outdoor staging helps buyers form an emotional connection with a home before they even step inside. A clean, inviting exterior can make a property feel more cared for, while thoughtfully designed outdoor spaces help buyers imagine themselves relaxing, entertaining, or spending time outside. In competitive markets especially, those details can help a listing stand out from similar homes nearby. “Staging allows buyers to see the potential of the space and aids realtors in securing high-investment buyers,” shares Julia, CEO of JP Urban Moving . “Staging is an aspect of the moving industry that customers generally don’t consider, but it’s vital and on the rise.” Outdoor staging can also help: Create a stronger first impression during showings. Highlight usable outdoor living areas like patios, porches, and backyards. Make the home feel move-in ready . Showcase the lifestyle the property offers , not just the structure itself. Help buyers remember the home after touring multiple listings. Focus on curb appeal first Curb appeal plays a major role in shaping a buyer’s first impression of a home. Before buyers notice updated interiors or spacious layouts, they’re already evaluating the condition of the yard, landscaping, and exterior maintenance. “Ensure your home is move-in ready by maximizing its curb appeal and value through thoughtful landscape design,” suggests Fel Quinn, Marketing Director at TerraVita Landscape & Gardening Inc. “Carefully consider how the trees, shrubs, and perennials add interest while keeping the space low-maintenance. Sometimes less is more – by prioritizing strategic planting and the overall health of your landscape, you can create a welcoming space that is both well-kept and inviting.” To improve curb appeal before listing your home: Trim overgrown trees and shrubs. Refresh mulch in flower beds and garden areas. Mow and edge the lawn regularly. Keep walkways, driveways, and entryways clean and clutter-free. Choose landscaping that looks attractive while remaining low-maintenance. Create outdoor spaces buyers can picture themselves using When staging an outdoor space , the goal is to help buyers imagine how they would actually live there. A cozy patio setup, welcoming front porch, or peaceful backyard can make the home feel like a retreat rather than just another property on the market. Buyers are often drawn to spaces that feel functional, relaxing, and easy to enjoy from day one. “Think about it: It’s Friday afternoon, you just got off a busy work week, you’re dreaming of how long until you escape to your home, that peaceful haven from the chaos,” says Justin Wilson of American Irrigation Repair . “When you’re selling your house, you’re not just selling just the structure, you’re selling a vision of how a buyer feels when they step on the property.” To create outdoor spaces buyers can connect with: Arrange simple seating areas on patios or decks. Add outdoor pillows or neutral decor for warmth. Incorporate planters or flowers for natural color. Keep pathways and gathering spaces open and uncluttered. Highlight features like fire pits, gardens, or dining areas. Use lighting to make the space feel inviting during evening showings. Less clutter, more function: Keep outdoor staging simple When staging outdoor areas, simplicity often has the biggest impact. Buyers want to see spaces that feel open, functional, and easy to maintain, rather than overcrowded with furniture, decorations, or excessive landscaping features. A clean and thoughtfully arranged yard allows buyers to focus on the home itself while still appreciating the outdoor lifestyle it offers. “When staging an outdoor space to sell, focus on making it feel clean, welcoming, and easy for buyers to picture themselves comfortably living in and using the space,” says Beth Wren of Copper Creek Landscaping . “The goal is to create an outdoor space that feels polished, functional, low-maintenance, and like a natural extension of the home.” To keep outdoor staging simple yet effective: Remove broken furniture , excess décor, and unused yard items. Define seating areas without overcrowding the space. Add fresh mulch and trim overgrown plants. Highlight one or two focal points , like a bird bath or statement planting. Don’t forget the emotional connection buyers feel outdoors Outdoor spaces often leave the strongest emotional impression during a home tour. Long after buyers forget square footage or listing details, they tend to remember how a home felt – especially in areas where they can imagine relaxing, gathering, or unwinding. A thoughtfully staged exterior helps turn a property into something more personal and memorable. At its core, outdoor staging is about selling a feeling as much as a space. Buyers respond to environments that feel peaceful, cared for, and inviting, where they can easily picture everyday moments unfolding. Key emotional drivers in outdoor staging include: A sense of calm and retreat from daily stress. The feeling of a “personal oasis” or private escape. Warmth and comfort created through greenery, lighting, and layout. Subtle signals that the home has been well cared for over time. Spaces that feel ready for connection , whether with family, friends, or nature. How to stage your outdoor space to sell successfully Staging your outdoor space is about more than improving curb appeal – it’s about helping buyers imagine the lifestyle your home offers. Small updates like fresh landscaping, defined seating areas, lighting, and thoughtful decor can make your property feel more welcoming, memorable, and move-in ready. By taking the time to stage your outdoor space to sell, you can create a strong first impression that helps your home stand out to potential buyers.

What a Builder Warranty Covers on New Constructions (and What You’re on the Hook for Yourself)

By Dusty Rhodes • June 1, 2026

Buying a newly constructed home can come with a number of perks, one of them being a builder warranty. Now, the assumption is that the warranty means the builder will assume financial responsibility for anything that breaks . The truth is, while a builder warranty is issued to most new constructions, it covers a very specific list of features in and on the house. Understanding what is covered by this warranty and if you'll need a home warranty in addition to your insurance is an important step for first-time buyers of new-construction homes. Home warranty vs. builder warranty There are importants differences between a builder warranty and a home warranty . The primary difference is that a builder warranty covers new construction or a remodel by a builder. Most newly built homes come with a builder warranty. A home warranty applies to existing properties and covers appliances (like the oven, range, and garbage disposal) and household systems (like electrical, plumbing, heating, and cooling). And while a builder warranty is provided by the builder, a home warranty is purchased by the buyers. What’s covered and what’s not? The lifespan of a builder warranty depends on the specific features of the house. However, the typical builder warranty lasts six months to two years, with some lasting up to 10 years for "major structural defects" like an unsafe roof. While there are differences in warranties from builder to builder, in general, they should cover all of a home’s materials and workmanship. In most cases, that includes: Concrete foundations and floors Dry basement Clapboard and shingles Landscaping Carpentry Thermal and moisture cover Waterproofing Insulation Roofing and siding Doors and windows Glass Garage doors Paint Plumbing Electrical Heating and cooling Septic system Most builder warranties don't cover: Household appliances Defects resulting from work conducted by the homeowner or anyone else after the builder's work is completed Shrinkage and expansion of the house Normal fading of paint Shrinkage of joints/minor cracking Weather-related issues Dampness/condensation caused by failure of the homeowner to maintain adequate ventilation Insect damage Builder warranty essentials While a builder warranty is an “absolute must” if you're buying a new home, it shouldn't make you feel too comfortable, says Robert Pellegrini Jr. , Esq, president of PK Boston, a real estate law firm in Massachusetts . “A builder warranty can give a false sense of security to homebuyers, so you need to be careful.” You might assume something is covered that actually isn't. It’s up to you to ask your builder for the details of the warranty and, ideally, have an attorney look over the contract. “It's a significant negotiation—the builder wants to be responsible for essentially nothing, and it's in the buyer's best interest to have the builder on the hook for as much as possible.” Before you sign the contract, make sure you know not only what is and isn't covered, but also the length of the coverage. Pellegrini says you should also make sure you understand how to notify the builder should something go wrong during the warranty period. If you don't notify the builder in accordance with the contract terms, it could void the warranty. Some of the biggest disagreements arise when the cause is the issue, and the question is: "Was the damage due to neglect during building or to misuse by the homeowner?" For example, if a homeowner decides to clean his paintbrushes in his kitchen sink after he moved in, but doesn't realize that doing so will render the septic system inoperable, he will be liable for replacing it at his own expense. It’s not always cut and dried, though. “If homeowners act in good faith and work well with the builder, the builder is more apt to help you, even if it's not a warrantied item,” Pellegrini says. If the builder goes out of business, however, all bets are off. “In most cases, the buyer is out of luck,” he adds. Bottom line? If you buy a new construction, make sure you get a builder warranty. But don't bank on that warranty covering everything that might go wrong with your home. While you should try to get as much coverage from your builder as possible, repairs and maintenance fees are all part of the homeowning game.

Balancing Wants vs. Needs in Your First Home

By Dusty Rhodes • May 18, 2026

Buying your first home comes with a mix of excitement and pressure, especially when it comes to balancing wants vs needs in first home decisions. It’s easy to get drawn to stylish finishes and dream features, but the most successful buyers focus first on how a home functions day to day – and what they can realistically afford, often using tools like a home affordability calculator to stay grounded. Striking the right balance early can make the difference between a home that simply looks good and one that truly supports your lifestyle. In this guide, we break down how to separate must-haves from nice-to-haves so you can make a confident, practical decision. From navigating your home search in Spokane, WA , to settling into a new space in Austin, TX , these insights are designed to help buyers in any market make smarter choices. What’s the difference between wants and needs in a first home? When buying your first home , understanding the difference between wants and needs is one of the most important steps in making a confident decision. “Needs are the must-haves that make a home work. Good access, enough space for your furniture, a functional layout, and a location that fits your routine are essential,” states Rob Romano, Director of Operations at Coutu Movers . “Wants are the extras that make the home feel great, but don’t impact how easily you can actually live in it or move into it.” Needs are the foundation of a home that works for you day to day. These are the elements that directly impact how easily you can live in the space. Wants, on the other hand, are features that make a home feel more personalized or visually appealing, but aren’t essential. Rob Romano recommends: “From our experience handling high-end moves, clients who get clear on their needs early make better decisions and avoid common headaches on moving day – such as tight spaces, tricky access, or furniture that simply doesn’t fit. When the fundamentals are right, the entire move – from packing to final placement – runs smoother and feels a lot less stressful.” How your budget shapes wants vs. needs Your budget plays a major role in defining what counts as a need versus a want. What fits comfortably within your monthly payment should guide your priorities – not stretch them. Look beyond the purchase price and consider your total monthly cost, including your mortgage , taxes, home insurance , and maintenance. If a home pushes your budget to the limit, features that were once “wants” can quickly become financial stressors. It also helps to leave room for unexpected expenses like repairs or higher utility bills. Choosing a home that fits your budget comfortably gives you more flexibility – and the option to upgrade over time without added pressure. Why function should always come first It’s easy to fall in love with a home based on how it looks, but how it works is what truly shapes your day-to-day experience. A well-designed space makes everything from moving in to settling down feel easier, while a beautiful but impractical home can quickly become frustrating. “The biggest mistake buyers make is prioritizing how a home looks over how it functions,” says Raymond Correira, owner of Correira Brothers’ Moving & Storage . “A true need is anything that reduces friction – layout, storage, accessibility, and how easily the home can be moved into and lived in day-to-day. Most ‘wants’ fade quickly if the space isn’t practical.” Key elements of a functional home include: A layout that flows naturally and fits your lifestyle. Adequate storage to keep spaces organized and clutter-free . Easy access for moving furniture and daily use. Practical room sizes that accommodate how you actually live. Thoughtful design that fits your lifestyle . The hidden costs of prioritizing wants over needs Focusing too heavily on wants can feel rewarding at first, but it often leads to unexpected challenges down the line. While cosmetic features and trendy finishes may make a home feel move-in ready, they can distract from deeper issues that are far more expensive and difficult to fix. Over time, those overlooked “needs” can turn into costly renovations, daily frustrations, or even limitations on how you use your space. Common hidden costs include: Reworking a layout that’s inefficient or awkward. Updating outdated systems such as electrical, plumbing, or HVAC. Addressing structural issues or foundational concerns. Expanding spaces that don’t meet your needs. Retrofitting storage or functionality that wasn’t there to begin with. “After years of working on homes across the Carolinas, we always tell buyers to prioritize structure over style,” suggests Lauren Garlock, controller at BGC Expert Contractors . “A bad layout or aging infrastructure is costly to fix, but outdated finishes are an easy upgrade. Buy for the structure, renovate for the style.” Common wants vs. needs examples for first-time buyers When you’re house hunting , it’s easy for wants to feel like needs – especially when a home is beautifully presented. Breaking things down side by side can help you stay focused on what truly matters for your day-to-day life.