Buying a home is one of the biggest investments you’ll make, but navigating this financial milestone can be stressful if you’re unfamiliar with all the moving parts. That’s why working with a trusted, local realtor is so important, helping you navigate the market, negotiate offers, and ensuring the transaction goes as smoothly as possible.
At the same time, arming yourself with some basic knowledge of the process can make a big difference, helping you to feel more confident and make smarter decisions along the way.
As a part of our Common Questions When Buying a Home series, we’ve put together some of the most frequently asked questions about earnest money—including how it works and how it’s different from a down payment.
What is earnest money? How much should I set aside?
Earnest money, often called a good-faith deposit, is money you put down to show the seller you’re serious about buying their home. The amount can vary, so it’s best to ask your realtor for guidance. They’ll recommend what’s typical in your local market and may suggest adjusting the deposit based on how competitive the conditions are.
Who holds the earnest money?
Your earnest money should never go straight into the seller’s bank account, even if you’re 100% serious about the purchase. It’s always recommended to send it to a reputable third party, like a title company or real estate agent, to hold onto it until the sale is finalized. At Ohio Real Title, we make it easy for potential homebuyers to safely and quickly make their deposit through our Earnest Money Payment Tool.
Do I get my earnest money back if the sale falls through?
Your earnest money can be refundable depending on the reason the sale falls through and what’s outlined in your purchase agreement. Most offers include ‘contingencies’ related to financing, the title, the inspection, the appraisal, or the sale of the home that protect your earnest money if things don’t go according to plan.
For example, if the home inspection reveals major issues and you can’t find a solution with the seller, an inspection contingency allows you to walk away from the sale and get your earnest money back.
But if you back out for a reason not covered by a contingency—like changing your mind at the last minute—the seller may be entitled to keep it. Understanding your contract terms and having a trusted realtor partner can provide the safest option for protecting your earnest money should the transaction fall through.
What is the difference between earnest money and a down payment?
Earnest money is a percentage of the price of the home that you put down as a part of your offer. A down payment, on the other hand, is a percentage of the total home price – that you pay to the seller at closing.
The key difference between earnest money and a down payment is that your earnest money is part of the offer you make to purchase a home, whereas a down payment is part of the actual home purchase/closing.
At Ohio Real Title, we work hand in hand with you to ensure your closing is stress-free, prioritizing clear, timely communication, top-notch customer service, and smart technology to keep everything on track from start to finish.
For more answers to common questions when buying a home, check out the following posts: