Earnest money often sounds simple: a deposit showing a buyer is serious. But in practice, it’s one of the most misunderstood parts of a real estate transaction.
After guiding buyers and sellers across Gilbert, Chandler, Mesa, Queen Creek, Scottsdale, Phoenix, and Paradise Valley, I see confusion around earnest money create unnecessary stress — and sometimes poor decisions.
Let’s clear it up.
What Earnest Money Actually Is
Earnest money is a buyer’s good-faith deposit submitted after an offer is accepted.
Its purpose is to:
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Demonstrate commitment to the purchase
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Compensate the seller if the buyer fails to perform under the contract (depending on circumstances)
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Create accountability for both parties
It’s not an extra fee — it’s applied toward the purchase at closing.
Why Buyers Often Overestimate the Risk
Many buyers worry that once they submit earnest money, it’s automatically at risk.
In reality:
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Contracts include contingency periods
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Buyers typically have protections during inspections and due diligence
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Earnest money is not meant to be forfeited casually
Understanding timelines and terms makes a big difference.
Why Sellers Often Overestimate the Security
On the seller side, earnest money is sometimes viewed as guaranteed protection.
But:
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Sellers don’t automatically receive earnest money if a deal falls apart
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The reason for cancellation matters
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Contract language determines outcomes
Earnest money reflects seriousness — not certainty.
Why the Amount Isn’t Always the Most Important Part
A larger earnest money deposit can signal commitment, but it’s not the full story.
Sellers also look at:
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Contingency strength
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Buyer timelines
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Overall offer structure
Sometimes a smaller deposit paired with clean terms performs better than a larger deposit with uncertainty.
How Earnest Money Influences Negotiations
Earnest money can:
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Strengthen an offer in competitive situations
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Help sellers feel more confident moving forward
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Be adjusted strategically during negotiations
But it should always align with the buyer’s comfort level and contractual protections.
What This Means for Sellers
Sellers should focus on:
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How earnest money fits into the full offer
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The buyer’s ability to perform
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Contract timelines and contingencies
A strong offer balances commitment and clarity.
What This Means for Buyers
Buyers should understand:
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When earnest money is protected
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When it could be at risk
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How deadlines affect outcomes
Clarity prevents unnecessary fear and helps buyers move forward confidently.
FAQs: Earnest Money Explained
Q: Is earnest money refundable?
A: Often yes — depending on contract terms and timing.
Q: Do higher earnest money deposits guarantee acceptance?
A: No. Sellers consider the entire offer, not just the deposit.
Q: When is earnest money typically due?
A: Shortly after the offer is accepted, per the contract.
Q: Who holds the earnest money?
A: Usually a neutral third party, such as a title or escrow company.
Q: Can earnest money be negotiated?
A: Yes — amount and terms are often part of negotiations.
The Bottom Line
Earnest money isn’t meant to scare buyers or guarantee sellers — it’s a tool to show intent and keep transactions moving forward. When both sides understand how it really works, decisions become clearer and less stressful.
Knowledge removes uncertainty — and that’s always a win.
Have Questions About an Offer? Let’s Review It Together
If you’re buying or selling in Gilbert, Chandler, Mesa, Queen Creek, Scottsdale, or the greater Phoenix area, I’ll walk you through earnest money terms clearly — so you know exactly what’s protected and what matters most.
📞 480-980-4400
📧 [email protected]
🌐 www.denisehurd.com
Because confidence comes from understanding the details.