Author: O.K. Hogan | REALTOR®/BROKER, CCIM, SFR
Hello! I'm O.K. Hogan—your trusted real estate advisor here on North Carolina’s beautiful Crystal Coast. Whether we've chatted about boats, swapped gardening tips, or shared honey from my backyard beehives, one thing I understand deeply is how exciting—and sometimes overwhelming—buying your first home can feel.
Earnest money, also known as a good faith deposit, is a sum of money a buyer provides when making an offer on a property to demonstrate their serious intent to purchase. It's typically a percentage of the purchase price, ranging from 1% to 3%, and is held in an escrow account until closing. This deposit serves as a buffer for the seller, covering potential losses if the buyer defaults on the contract. (Investopedia)
Today, let’s explore exactly what earnest money is, why it matters, how it works—and how to protect yours every step of the way.
What Is Earnest Money?
Think of earnest money as a financial handshake. It signals to the seller that you’re committed to the transaction and not just casually browsing homes. This deposit is typically due within a few days of offer acceptance and is held securely in an escrow account until closing.
Quick Comparison Table
| Earnest Money | Down Payment | |
| When Paid | Within days of offer acceptance | At closing |
| How Much | Typically 1–3% of purchase price | Usually 5–20% of purchase price |
| Purpose | Shows buyer commitment | Reduces overall loan amount |
| Held By | Escrow/title company or attorney | Paid directly at closing |
Why Is Earnest Money So Important?
Earnest money performs two vital functions:
1. Shows You’re a Serious Buyer
A strong earnest money offer assures the seller that you're committed, making your offer more attractive—especially in competitive markets.
As Matt Weaver, a mortgage loan originator with CrossCountry Mortgage, explains:
“Home buyers placing 3%, 5%, and sometimes up to 10% for earnest money helps demonstrate the level of seriousness. The amount of earnest money plays a role and speaks volumes to both the seller and the listing agent representing the property.”
— NAR Magazine
2. Protects Both Parties
The deposit sits in escrow, safely held until closing or cancellation. It protects the seller from losses if a buyer backs out without cause, and it also protects the buyer when contingencies are in place.
Pros & Risks Table
| Pros for Buyers | Potential Risks |
| Strengthens offer | Can be lost if buyer defaults |
| Credited toward final closing costs | Requires upfront payment |
| Secured in escrow | Risk increases without contingencies |
How Much Earnest Money Should You Offer?
In Eastern North Carolina and along the Crystal Coast, the average earnest money deposit is around 2% of the purchase price. But for luxury properties or competitive bidding situations, a higher deposit can make your offer stand out.
Local Example Table
| Area | Avg. Home Price | 2% Earnest Money |
| Morehead City | $550,000 | $11,000 |
| Beaufort | $480,000 | $9,600 |
| Emerald Isle | $825,000 | $16,500 |
| Wilmington (28411) | $610,000 | $12,200 |
In fact, Nick Wemyss, a real estate professional with Intero Real Estate, notes:
“In hot seller’s markets, buyers may want to offer larger earnest money deposits—up to 5% or even 10% of the purchase price. This is to help make their offer more attractive to the sellers and possibly better compete against other buyers.”
— NAR Magazine
When and How Do You Pay Earnest Money?
You typically have 1–3 business days after your offer is accepted to pay the deposit.
Accepted Methods:
- Certified check
- Wire transfer
- In some cases, personal check (verify with your agent)
How-To Guide: Paying Earnest Money Securely
- Confirm the escrow holder with your agent.
- Get the official wire or mailing instructions.
- Call the escrow company to confirm (don’t rely on emailed instructions).
- Submit payment.
- Keep your receipt and share confirmation with your agent.
Security Tip: Never send funds based solely on an email. Always call to verify wire details. Real estate fraud is real.
What Happens to Earnest Money at Closing?
If all goes well, your earnest money is credited toward your down payment or closing costs. It's not an extra fee—just money you pay upfront that reduces your amount due at closing.
What If the Deal Falls Through?
If you cancel the deal under a valid contingency (like a failed inspection), your deposit is refunded. If you walk away without cause, the seller may keep it.
As Deonte Cole, a Realtor at Keller Williams Realty, puts it:
“Earnest money is a security deposit a buyer pays to show their commitment to buying a house. It can be refunded to you under certain circumstances and if it's built into your contract.”
— Business Insider
Contingencies: Your Earnest Money Safety Net
Contingencies are protective clauses that allow you to exit the contract with your earnest money intact if certain conditions aren't met.
Top Contingencies Every Buyer Should Include
| Pros for Buyers | Potential Risks |
| Strengthens offer | Can be lost if buyer defaults |
| Credited toward final closing costs | Requires upfront payment |
| Secured in escrow | Risk increases without contingencies |
Common Earnest Money Pitfalls to Avoid
Even well-meaning buyers make mistakes. These are the most common:
❌ Missing deposit deadlines
❌ Skipping essential contingencies
❌ Wiring funds without verifying instructions
❌ Assuming all deposits are refundable
First-Time Buyer Checklist: Protect Your Earnest Money
✅ Include strong contingencies
✅ Use verified escrow services
✅ Confirm deadlines in writing
✅ Never skip home inspections
✅ Stay in touch with your agent
Common Buyer Questions
Buying your first home is a big step, and I’m here to make sure you feel confident through every part of the journey. Here are a few questions I’m often asked by first-time buyers:
Is earnest money refundable if the deal falls through?
Yes, earnest money is typically refundable if you cancel the contract for a valid reason covered by a contingency, such as a failed inspection or financing issue.
How much earnest money should I offer on a home?
Most buyers offer between 1% and 3% of the purchase price, but in competitive or luxury markets, deposits of 5% or more can help strengthen your offer.
Who holds the earnest money during the transaction?
Earnest money is held by a neutral third party—usually a title company, escrow agency, or closing attorney—until the sale is finalized.
Conclusion
Buying your first home doesn’t have to be overwhelming. With the right team by your side, the process becomes exciting, empowering—and even enjoyable.
At Star Team Real Estate, we’re here to guide you every step of the way—from your very first showing to the moment you’re handed the keys. With a trusted reputation along the Crystal Coast, we bring unmatched local knowledge, honest advice, and a genuine commitment to your success. Whether you're dreaming of a cozy cottage in Beaufort or eyeing a waterfront estate, we’re ready to help you make it a reality.
Let’s start building your future—one smart decision at a time.
Call us today at 252-727-5656 or contact us to begin your homebuying journey with confidence.
Check out this article next
