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Buyer's Guidechevron_rightGlossary

Earnest money

In plain English

A deposit you make when your offer is accepted, to show the seller you're serious. A neutral party holds it, and at closing it goes toward your down payment or closing costs. Walk away for a reason your contract allows, like during due diligence, and you get it back. Walk away for a reason it doesn't, and you can lose it.

By David Knorr · Last reviewed October 28, 2026

Why it matters to you

It's usually thousands of dollars, and it's the money at risk if you miss a deadline. Most buyers who lose it don't lose it over the house: they lose it over the calendar.

"I came within minutes of losing $20,000 in earnest money on my first home." David Knorr, founder

An example with numbers

$3,500on a $350,000 home, at 1%. The amount is set in your offer; 1% to 3% of the price is common.
At closingcheck_circleCredited to you
You walk away during due diligencecheck_circleBack to you
Your financing falls through, with a financing contingencycheck_circleUsually back to you
You walk away after due diligence, with no other right in the contractcancelUsually kept by the seller

Earnest money or option money?

In Georgia you often pay both. They do different jobs.

Earnest moneyOption money
Who gets itA neutral holder named in the contractThe seller
How muchUsually thousands$10 on the standard form; a seller can ask for more
What it buysShows you're seriousYour right to walk away during due diligence
You walk away in due diligenceRefundedThe seller keeps it

Common questions

Is earnest money part of my down payment?expand_more

Yes. It isn't an extra cost: at closing it's credited toward your down payment or closing costs.

Who holds it?expand_more

The holder your contract names, often the listing broker or the closing attorney. It sits in an escrow account until closing.

When can I lose it?expand_more

When you back out for a reason the contract doesn't give you, most often after due diligence has ended. Know your deadlines: work out yours.

routeStep 5: Make an offerOption moneyEscrowContingencyBinding Agreement Date

infoGeneral information based on the standard Georgia REALTORS® purchase contract and public guidance. Your own contract decides: read it, and ask your agent or closing attorney about anything that matters. Not legal or financial advice.