It's one of the first real money moments in the homebuying process — here's exactly how it works and how to send it safely.
What earnest money actually is
Earnest money is a good-faith deposit you make shortly after your offer is accepted, showing the seller you're serious about the purchase. It's not an extra fee — it's later credited toward your down payment or closing costs, so it isn't money you lose in a smooth transaction.
Who holds it
Earnest money is typically held by a neutral third party, like a title company or escrow agent — not the seller directly. This protects both sides while the transaction moves through inspection, appraisal, and financing.
When you could lose it
Whether you could lose your earnest money depends on the contingencies in your purchase agreement. If you back out for a reason covered by an active contingency (say, a financing contingency and your loan falls through through no fault of your own), you're typically protected. If you back out for a reason not covered by a contingency, you risk forfeiting it — which is exactly why understanding your contract's contingencies matters.
The single most important safety step
Wire fraud targeting earnest money and closing funds is a real and growing risk. Never wire money based solely on instructions received by email, even if the email looks legitimate. Always call the title company directly, using a phone number you look up independently (not one from the email), to verbally confirm wiring instructions before sending any funds.
Frequently asked questions
Amounts vary by price point, market, and local custom — there's no fixed legal minimum. Your agent can give you a sense of what's typical for the price range and area you're shopping in.
See where this fits in the bigger picture
Check out the full interactive homebuying roadmap.
Sources
- Wire Fraud and Real Estate Transactions — Consumer Financial Protection Bureau
First Keys Editorial Team
Content Team
The First Keys editorial team researches and writes Michigan-specific homebuying education, reviewed for accuracy before publishing.