Earnest money at closing?

The Buyers earnest money is applied to the Buyers closing costs at settlement. Only time that doesn't happen is if they "default" on the purchase of the home and the Seller is awarded this escrow (or earnest money). In SC, we are an attorney state and the earnest/escrow money is held by the Buyers attorney and then applied at closing.

Earnest money should be viewed as a "pre-payment" as part of the buyer's down payment, on the house. For example, if the house price is $300,000 and the buyer has a 10% down payment and a 90% loan, typically the earnest money would be around 1%. So, the buyer pays a $3,000 earnest money deposit, then still owes $27,000 at closing as their 10% down payment and then their loan would be $270,000, plus any other closing costs.

The earnest money goes into an escrow account that can be a credit towards the amount you must bring to closing or refunded if you have 100% financing and 100% closing cost concessions.

The Buyers earnest money is applied to the Buyers closing costs at settlement.

Great question, Jolene. Earnest money is basically a good-faith deposit to show you’re serious about buying. In Florida, it usually goes into an escrow account until closing. If the deal closes, that money is applied toward your closing costs or down payment—it’s not extra money you lose. If the deal falls through for a reason covered in your contract (like inspection or financing), you can usually get it back. But if you back out for a reason not allowed in the contract, the seller may keep it.

In Florida, earnest money demonstrates a buyer's good faith and desire to purchase the property, serving as "skin in the game." The more you deposit, the stronger your commitment to the seller. These funds are held in a non-interest-bearing escrow account by a closing agent, title company, or real estate attorney.

The earnest money is applied as a deduction to the home's sale price. While you won't get it back in the traditional sense, you may be able to negotiate a seller credit at closing, which you can then use as you wish.

The only way to receive your earnest money back is by canceling the contract within the timeframe specified in the offer agreement.

In a typical real estate transaction, the buyer does not receive their earnest money back as a separate check after closing. Instead, this "good faith" deposit is applied as a credit towards the total amount of money the buyer needs to bring to the closing table. This means it directly reduces your out-of-pocket expenses for the down payment and closing costs. Exception if Purchaser defaults, and Seller is awarded escrow.

In Texas, buyers’ earnest money is held in an escrow account by the title company (or sometimes the broker) during the transaction. What happens to it at closing depends on how the deal wraps up:

If the sale closes normally:
The earnest money is applied toward the buyer’s closing costs and/or down payment. It’s basically a prepayment that reduces what the buyer needs to bring to the table at closing.

If the contract terminates under a valid option or contingency (financing, appraisal, inspection, etc.):
The earnest money is usually refunded to the buyer, assuming they acted within the contract deadlines.

Yes, earnest money is a good-faith deposit, but what happens to it depends on whether the deal closes and on the terms of the contract. If the transaction goes through, the earnest money is usually applied toward your closing costs or down payment at settlement. If the deal falls apart for a reason allowed in your contract (for example, inspection issues or financing not coming through under a contingency), you typically get your earnest money back. If you back out of the deal without a valid contractual reason, the seller may keep the earnest money.

The earnest money you deposit is applied directly toward your total funds needed at closing, which includes your down payment and loan balance.

For example, if you’re purchasing a property for $1,000,000 with a 20% down payment, a 3% earnest money deposit, and an 80% loan, the numbers would work out as follows:

Purchase Price: $1,000,000
Earnest Money Deposit (3%): $30,000 (paid at the start of escrow)
Down Payment (20%): $200,000
Loan Amount (80%): $800,000

Because you’ve already deposited $30,000, the amount you’ll need to bring in at closing is reduced to $170,000 instead of the full $200,000.

This example doesn’t factor in additional costs such as closing fees.

Earnest money in Texas is a deposit made in good faith to show the buyer’s serious intent to purchase. Think of it as money held in trust while the contract is active. The title company holds the earnest money in escrow. At closing, if the deal goes through, that deposit is applied toward the buyer’s closing costs and/or down payment. So yes, the buyer gets the benefit of it back, it’s credited, not lost. If the deal doesn’t close, whether the buyer gets the earnest money refunded depends on the contract terms and timelines. For example, if they terminate properly within the option period, the earnest money is usually refunded. If they default without a contractual right to terminate, the seller may be entitled to keep it.

Because situations can vary, the contract and Texas law control what happens to the earnest money in each case. The title company will only release it when both parties agree in writing or a legal determination is made.

Yes, you'll get it back and it will be applied to your costs (deducted from the total amount you owe). The only time you will lose it is if you don't meet the contracted terms of your sale.

The earnest money is deposited to the escrow account as good faith that you are willing to buy the home. It is applied to your closing costs that you need to bring to closing, thereby reducing the amount you need to bring to closing by the amount of the earnest money. In this way, you do "get it back" as it's a reduction in what you need to bring to closing, but you don't physically get handed a check or receive a wire with this amount after closing. It simply reduces your closing cost amount. I hope this is helpful!

One of the most common questions I get. What I tell my buyers; earnest money shows your serious interest in the home, it's a good to go high especially when you are competing with other offers. It goes towards the purchase price. It's usually hard for a seller to keep your earnest money if you get out of the transaction due to a contingency (financing, inspection, appraisal,) It does reflect on the closing statement and ultimately allows the buyer to bring less to the closing table. In some cases like VA loans where you can finance 100% you could get money back at closing.