What is it?
The Earnest Money is a good faith deposit that is made when an offer is accepted, and held by the escrow company until closing. It shows the buyer’s seriousness in the offer, as it is the amount the buyer is willing to to give up should they choose not to close for any reason other than those provided for in the offer contingencies. Earnest money is not additional to the purchase price, but part of it. The earnest money will go towards the purchase price, closing costs, or other fees at closing; any balance will be returned to the buyer.
What is standard?
There is no set standard earnest money amount, but we typically see 1-5% of the purchase price (in Washington State, a seller can’t keep more than 5%, even if a buyer offers more). The higher the amount, the more seriousness the buyer shows. We typically recommend no less than 2%, and usually suggest 3-4%.
Keep in mind that this must be deposited within two days of an offer being accepted, so this needs to be in a very liquid account that can be accessed easily. We recommend buyers searching for a home have this available in a savings or checking account.