09/28/2026
Earnest Money -
Closing Details, Earnest Money, Investors
I get this question occasionally: "How much do I need to put down as Earnest Money?"; "Do I need to put down any earnest Money?"; "What if I forgot to put down Earnest Money?"; or "Who do I give the Earnest Money to?"
Let's start from the beginning ...
Earnest Money is what the buyer puts up, something of value, to show how serious they are in their interest to purchase the property. Most people view the amount put down as how serious or committed the buyer is to come through on the purchase. Most of the time the more they put up, the more serious they are. I know Buyers when looking at buying an investment property that had no problem putting down all of the purchase price as Earnest Money because they were committed to buying the property no matter what. There are some Buyers that don't want to put down a lot (or anything) because they are putting out a dozen offers and mostly just "fishing." Other times there is enough trust there that no one requires any Earnest Money is used at all. That brings us to STRATEGY ...
Why would I put down a lot or next to nothing as Earnest Money? It all depends. It's about making a point or lowering risk. A lot depends on the market and whether there's a trend of investors/buyers not closing. Your higher Earnest Money could make your lower offer much more attractive. If you put down $10,000 compared the other guy putting down $100 or even nothing ... who has more at risk? who is likely to go past the point of any due diligence and close or have their money at risk? Ultimately, it comes down to how serious you are, what the Seller wants and how trustworthy all of the parties are. From a Seller's perspective, you may want more Earnest Money to protect your time holding the property off the market or turning down/away other offers. Of course many contracts use Earnest Money as liquidated damages if the Buyer defaults. What I typically see are buyers putting down $100 to $1000 on very inexpensive properties and $1000 to $10,000 or 10% on more expensive properties. ALSO, keep in mind, there is no requirement to have Earnest Money for the contract to be legally binding.
No EM needed? Yep. EM is not a legal requirement for a binding contract.
If you specified EM in the contract, but it wasn't paid ... what does that do. It depends. First, your contract should specify what happens. If it doesn't - you really need a better contract. Second, if it doesn't say, but the parties move forward without making it an issue, it won't be an issue at closing except for accounting for it on the Settlement Statement.
Earnest Money can be given to anyone. Typically, if a real estate agent is involved, one of the agents will hold the money. If there isn't an agent involved, it might be the closing attorney or the Seller. Never give EM in cash to a Seller. If there is no way to track the EM given to a Seller, don't make a fuss if the closing attorney refuses to account for it at closing. "Absent" EM is heavily tied to many fraud schemes and mortgage fraud. (Don't be that person!) Also, always check with your closing attorney about their willingness to hold EM - why, because 99% of the time the closing attorney is not a party to the contract and not obligated to hold funds or serve as mediator if the deal falls apart.
