What Is Earnest Money: Its Purpose in Sales

By Kristi Waterworth – Updated Jul 1, 2025 at 3:23 AM EST

Key Points

Earnest money is a refundable deposit made during significant purchases like real estate.
The typical earnest money range is 1% to 15%, depending on property interest levels.
If a real estate deal fails, earnest money may be fully or partially refunded based on contract terms.

If you're trying to buy something large with a contract that's complicated, you may be asked to put some money up front, just to demonstrate how serious you are about the transaction. This is earnest money – money to show you're earnest.

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A desk with a calculator and a sticky note that says Earnest Money Deposit. — Image source: Getty Images.

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Ultimately, what happens to your money should be spelled out in the contract, but you can generally expect one of three outcomes:

You get all your money back. If it's the seller who fails to perform -- they don't do what they were supposed to do or are unable to sell the property for other reasons -- you'll usually get all your money back.
You get some of your money back. In some situations, the fault for the contract failing may be split between the buyer and the seller, in which case you may be responsible for some fees or other penalties, but you should get the rest of your money back.
The seller gets your money. This is the worst outcome, but if you really mess up, the seller will sometimes get your money. This is why it's really important to have contingency clauses for things like your financing and the appraisal. If contingencies are in place and you can't get a loan or the appraisal isn't high enough to get your loan, you will still get your earnest money back.

Generally, most people will get their earnest money back in some form. It's not a system that's designed to take your hard-earned cash. But it also creates a balanced dynamic between buyer and seller to ensure everyone behaves fairly throughout the transaction.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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