What is Earnest Money in Real Estate? | OR & WA Guide

Protecting Your Funds: Everything You Must Know About Earnest Money

When you write an offer to buy a home in Portland, Lake Oswego, Vancouver, or Camas, you will be required to include an Earnest Money Deposit.

Earnest money is often referred to as a "good faith deposit." It demonstrates to the seller that you are a serious, committed buyer who intends to complete the transaction according to the terms of the contract.

Because earnest money involves transferring thousands of dollars into an escrow account early in the deal, understanding how your money is protected is essential.

How Earnest Money Works During Escrow

• The Transfer: Within 2 to 3 business days after your offer is fully accepted, you wire your earnest money deposit to a neutral, third-party title and escrow company.
• The Holding Period: Escrow holds the funds securely in an escrow account. The money does not go directly to the seller's personal bank account.
• Closing Day Credit: On closing day, your earnest money deposit is applied directly toward your total required down payment and closing costs.

How Contract Contingencies Protect Your Deposit Your purchase agreement includes specific "contingency clauses" that allow you to cancel the contract and receive a 100% full refund of your earnest money deposit if specific conditions aren't met:

• Inspection Contingency: If the home inspection reveals structural issues you aren't willing to repair, you can cancel during your agreed inspection window and retrieve your deposit.
• Financing Contingency: If your mortgage lender denies your loan despite your best efforts, your deposit is protected.
• Appraisal Contingency: If the home appraises lower than the agreed purchase price and the seller refuses to drop the price, you can back out safely.

Frequently Asked Questions

• How much earnest money do you need to buy a house in Oregon and Washington? Standard earnest money deposits generally range between 1% and 3% of the total purchase price, depending on how competitive the market is.
• Can a seller keep my earnest money deposit? A seller can keep your earnest money only if you breach the contract without a valid contingency reason—such as walking away from the purchase the day before closing simply because you changed your mind.
• How long does it take to get your earnest money back if a deal cancels? Once both buyer and seller sign a formal cancellation agreement, the escrow company typically processes and wires the refunded earnest money back to the buyer within a few business days.

Want to write an offer that keeps your money fully protected? We structure clear, safe real estate contracts for our clients.

Call us today to start your home search!

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