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Understanding the Earnest Money Deposit when buying a home

Updated: Jul 10, 2023

When buying a home, it's essential to understand the ins and outs of the earnest money deposit. This deposit protects the buyer and the seller in case of a failed transaction or any other issue. In this article, we'll explain the earnest money deposit, who holds it, and how much you should deposit. We'll also cover what happens if you need to withdraw your offer and offer tips to help you navigate the process successfully. By understanding the earnest money deposit, you can confidently approach your home purchase and avoid confusion.

Deposit boxes.

In this article:

What is Earnest Money?

The earnest money deposit (EMD) is a small percentage of the down payment on your new home. The purchase and sale contract will specify all of the information regarding the earnest money deposit. For example, the amount to be deposited and a deadline is set for the deposit. In addition, you may split up your deposit and make an initial deposit with another deposit by a later date.

Example of the earnest money escrow deposit section of the Florida AS-IS Purchase and Sale Contract.
Example of contract

Generally speaking, when buying property, the title or escrow company will give instructions on how to make the deposit. Then, once funds have cleared, the escrow holder will send a confirmation "escrow letter" for both parties' records.

Who holds the deposit?

When buying property in Miami, title/escrow companies are typically involved because they hold deposits until the sale is finalized before releasing them for use as part of the buyer's down payment.

As such, in Miami, it usually falls upon prospective homeowners to choose which company will handle all financial transactions related to closing costs between themselves and sellers. So make sure you research title companies to find the right company for you; your agent should have good recommendations for you.

How much is the Earnest Money Deposit?

The earnest money deposit can vary on a few factors, including the strength of the real estate market and limitations in different states. If you're looking for your perfect Miami home, have enough cash available, which is often between 1-2% of what you plan to purchase! In addition, multiple offers may be made on a property; in this case, you may need to put more in escrow for your offer to stand out.

What if something goes wrong with my offer to purchase property, and I want to withdraw my offer?

If the purchase falls through, you are entitled to a deposit refund. The title company will determine whether or not you qualify for this under the terms of your agreement with them and who is at fault when it comes to any cancellation fees involved.

The buyer is protected by contingencies outlined in the contract that allows them to cancel the agreement if he does not like what his home inspector finds or if financing falls through. Still, there are also consequences for buyers who need to follow these terms. For example, a seller may claim their earnest money deposit as compensation should they default on an agreed-upon period.


In conclusion, the earnest money deposit is an essential aspect of any real estate transaction that should not be overlooked. It acts as a form of protection for the buyer and seller if something goes wrong with the purchase agreement. As a buyer, it is crucial to understand the amount and terms of the deposit and who holds the deposit until the sale is finalized. By clearly understanding the earnest money deposit, you can make a confident and informed decision when making an offer on a property. Remember to consult your real estate agent for guidance and advice on successfully navigating this process.


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