Earnest money explained
Don't sign blind.
Earnest money is the deposit a buyer puts down to show good faith when signing a home purchase agreement. The amount, the refund triggers (contingencies), and what happens on buyer default decide your real exposure.
No account requiredFile deleted after analysisNot legal advice
What it usually means
Earnest money is held in escrow when the buyer and seller sign a purchase agreement. Common amounts range from 1-3% of purchase price; competitive markets sometimes push higher. Refund triggers and default remedies are spelled out in the contract.
Why it matters before signing
If you cannot close, what happens to your earnest money and what else can the seller pursue? Most contracts let the seller keep the earnest money as liquidated damages. Some contracts also allow specific performance, which can compel you to complete the purchase.
What to ask before signing
- How much earnest money is at risk relative to my purchase price?
- What contingencies (inspection, appraisal, financing, title) trigger refund?
- What are seller's remedies on buyer default? Earnest money only, or also specific performance?
How Dang catches it
Dang flags earnest money above 5% of purchase price with weak refund language, and the punitive double remedy where seller can keep earnest money AND pursue specific performance.
Frequently asked questions
What's a reasonable earnest money amount?
1-3% of purchase price is common. Higher amounts in competitive markets shift more risk to the buyer.
Is earnest money refundable?
Generally yes within active contingencies (inspection, financing, appraisal, title). Outside those, the seller may keep it as liquidated damages.
What is "specific performance"?
A court remedy that compels one party to complete the contract. In a home purchase, seller-side specific performance against a defaulting buyer can force the buyer to close.
Sources & further reading
No account required · File deleted after analysis · Not legal advice. Dang reports contract findings in plain English. For consequential decisions, consult a licensed attorney in your state.