Using Earnest Money Strategically

By Kayvon Mohammadian ⋅ 02/21/2026

When you're ready to make an offer on a home, earnest money becomes your first opportunity to show commitment. Therefore, using earnest money strategically can make all the difference in a competitive market.

Read below to learn how to make your earnest money a competitive advantage and stand out from the crowd.

What This Article Includes:

1. What is Earnest Money?

2. Can I Lose My Earnest Money?

2. How Much Should You Offer?

3. The Power of More

4. The Non-Refundable Deposit

5. My Recommendation

What is Earnest Money?

Earnest Money is a Deposit

Earnest money is essentially a deposit you make after your offer is accepted. Think of it as a good-faith gesture that demonstrates your commitment to the purchase.  Don’t worry, it’s not an added cost on top of the purchase price. It becomes part of your down payment at closing.

Held By Escrow

The buyer provides their earnest money directly to the escrow company, not the seller. Buyers usually deliver it via check or wire within 2 or 3 days after the seller accepts their offer. In most cases, the escrow company holds it until the closing date when they lump it together with the rest of the funds for the seller.

Pro Tip:

Be sure you at least have funds for earnest money readily available when you need them. You don’t want to get stuck waiting for investments to sell or money to transfer to your account. This could cause you to be late with delivering the earnest money and be in breach of contract.

Your Earnest Money Holds You to the Contract

Once a seller accepts your offer, both parties become legally bound to the contract. The  seller cannot back out and must proceed with selling their property as agreed. Similarly, you as the buyer are held to the contract with your earnest money at stake if you break the agreed upon terms. Think of it as collateral you provide to ensure you abide by the terms of the contract

Can I Lose My Earnest Money?

Earnest Money Is Protected by Your Contingencies

If the deal falls through due to legitimate reasons covered by your contract’s contingencies, you'll usually get this money back. However, if you simply change your mind without a valid reason, the seller may be entitled to keep it. Conversely, if the seller defaults on the contract, the escrow company protects and returns your earnest money to you (and you may be entitled to further damages from the seller).

Common Contingencies That Protect Earnest Money

An Inspection Contingency is one of the main parts of your offer that can protect your earnest money. If you are conducting an inspection and decide not to purchase the house for any reason, you will receive your earnest money back. However, if you have passed the inspection period you no longer have that protection.

The Financing Contingency is another common contingency that protects you in multiple ways. The first is if your lender rejects your loan through no fault of your own, you can back out of the purchase with your earnest money. It also protects you in case the home does not appraise for the amount you agreed upon.

There are many other parts of your offer that can protect your earnest money. Such as: Title Contingency, HOA Review Period, Neighborhood Reviews, Feasibility Studies, and many others. Make sure you understand these contingencies and how they can protect you. Keep in mind, the more contingencies you utilize in your offer, the less competitive it will make you in a multiple offer scenario.

How Much Should You Offer?

Use Your Earnest Money Strategically

There is no minimum or maximum amount of earnest money required for an offer. Although, if you are only putting down $1000 sellers won’t take you seriously. It should be enough that the seller feels comfortable knowing that you won’t walk away from the deal without cause. Remember, you should use your earnest money strategically to stand out from the crowd. 

Offer at least 3%

Typically, we recommend at least 3% of the property’s purchase price. Anything less and a seller may feel that you are not fully committed. You don’t want the seller to move to the next buyer over fears that you may walk away for no reason.

The Median Home price in Seattle in 2026 is around $850,000. In that case, you should plan on offering at least $25,000 as your earnest money. Keep in mind many buyers offer more than that so if you are expecting to compete you should consider offering above 3%.

The Power of More

Going Beyond the Standard

In a competitive situation, consider increasing the amount of your earnest money beyond 3%. It is a way to show that you are fully committed to the sale and will not back out. No buyer wants to lose their earnest money and sellers will feel reassured. You are less likely to walk away from $50,000 than $20,000. However, legally you cannot lose more than 5% of the purchase price if the deal falls through. Of course, losing any amount of earnest money is never the plan regardless of legal protection.

In Multiple Offer Scenarios Sellers Will Notice

Many buyers often wonder how much a seller will care about the amount earnest money. If you are not competing with other buyers, it may not be the biggest factor whether your offer is accepted or not. However, if the seller is comparing multiple offers that are very similar to one another, it is something they will note. Using your earnest money strategically will make a difference.

When we are preparing our clients to compete for a home, we do whatever we can to make our offer stand out. Earnest money is one of the first things a seller will notice on the first page of your offer. This is a chance to show immediately that you are committed. If you are doing whatever you can to stand out, don’t overlook this important factor.

The Non-Refundable Deposit

Aggressive, Risky, and It Works!

Now, let's discuss a more aggressive approach: converting your earnest money into a non-refundable deposit. This is the most impactful way you can use your earnest money strategically. However, I must warn you that this tactic can carry significant risks.

By making all or part of your deposit non-refundable, you're instructing escrow to release that money directly to the seller before closing. Escrow usually turns it over to the seller just a few days after they accept your offer.

I know this sounds crazy but it is an effective way to get your offer noticed and hopefully convince a seller to choose you. You are enticing them with the potential of receiving your earnest money in a few days. This is particularly helpful for sellers who are low on funds and may have additional expenses associated with selling or moving to a new home. Plus, who wouldn’t want to be offered a large check almost immediately rather than 3 to 4 weeks?

Why Buyers Choose This Strategy

Recently, many buyers in hot markets have embraced this approach. This is because most aggressive offers already waive contingencies that protect earnest money. Contingencies like the inspection, financing, and title are the first to be waived when competing. Therefore, few scenarios exist where you'd recover those funds if you decided not to buy the house. That is, of course, unless the seller fails to uphold their end of the contract.

Your Commitment is Clear

By offering a non-refundable deposit, you're simply accelerating the timeline. It shows that you are, without a doubt, committed to purchasing the home. If you have waived all contingencies and you convert your earnest money to a non-refundable deposit, you will obviously do whatever you can to make the sale go through. That has real value to the seller.

Understanding the Risks

When converting your earnest money to a non-refundable deposit, it doesn't mean sellers can simply walk away and keep your money. Both you and the seller must uphold the terms of the contract. Nevertheless, if the seller does try to back out and keep your earnest money, you'll likely need to pursue legal action to recover it.

As for all our recommendations in real estate, don’t do anything that will keep you up at night. If you have doubts about your ability to uphold your end of the contract, then this strategy is not right for you. Talk to your real estate agent to be sure you understand the level of competition and help determine whether this is necessary or not.

My Recommendation

Make You Earnest Money Work For You

Your earnest money is one of the first things a seller will notice about your offer. It is right near the top of your offer on the first page and a chance for you to show your intent. You should plan on offering at least 3% of the purchase price to make it clear you intend to move forward with the sale. Remember, depending on your contingencies you will receive the earnest money back if you decide not to proceed with the purchase.

Consider the Non-Refundable Deposit

If you are expecting to compete for a home, you should seriously consider converting your earnest money into a non-refundable deposit. This strategy is aggressive and not for everyone but it can make the difference between you getting the house or not. There are very real risks associated with it so be sure you understand what you are signing up for.

Understand the Risks and Get the House!

Being sure you understand what you are signing up for holds true for every aspect of a home purchase. We are confident in our approach because, after hundreds of transactions, we have never had a buyer lose their earnest money. It is only after careful consideration and risk assessment that we are able to help our buyers be as competitive as possible, while protecting what is important.

If you would like to know more about utilizing your earnest money to get a house or other parts of the home buying process, reach out anytime.