What is an Earnest Money Deposit?

A Guide for Buyers and Sellers

When you're ready to make an offer on a home, you want your bid to stand out—especially in a competitive market. One way to show you're serious is by including an earnest money deposit. But what exactly is it, and how much should you offer?

Let’s break it down.

What Is Earnest Money?

Earnest money—sometimes called a "good faith deposit"—is an upfront payment made by a buyer to show they’re serious about purchasing a home. It’s a way of proving to the seller that the buyer intends to follow through if their offer is accepted.

Once the buyer and seller enter into a purchase agreement, the seller usually takes the home off the market. The earnest money gives the seller peace of mind and motivation to move forward, knowing the buyer has something at stake.

🔑 Note: Earnest money is not the same as a down payment. It’s a separate deposit that’s held in a neutral escrow account—typically by a title company or real estate brokerage—until closing.

Is Earnest Money Required?

Technically, no. There are no laws requiring buyers to include earnest money with an offer. However, in practice—especially in hot markets—it’s strongly recommended.

Including earnest money can make your offer more competitive and appealing to sellers, particularly when there are multiple offers on the table.