The deposit you put up at offer acceptance. What it does, where it sits, and the specific scenarios where you would forfeit it.

In a normal transaction, you do not lose it. Here are the scenarios where you could.

What it is

Earnest money is a deposit you submit when your offer is accepted. It signals to the seller "I'm serious about this purchase" by putting cash on the line.

In Arizona, earnest money is typically

1% of the purchase price

. On a $400,000 home, that's $4,000. On a $600,000 home, $6,000. Some buyers in competitive offers put up more (2-3%) to strengthen the offer signal.

The money goes into an

escrow account

held by a neutral third party (the title company), not to the seller directly. It sits there until closing, at which point it's credited toward your down payment. You don't pay it twice. You're not losing the money in a normal transaction.

When you can lose your earnest money (the scenarios)

This is what most first-time buyers actually want to know.

In a standard Arizona purchase contract with contingencies, you can walk away from the deal WITHOUT losing earnest money during specific windows:

The inspection contingency window.

Usually 10 days from offer acceptance. If the inspection reveals issues you don't want to deal with (or if you simply change your mind during this window), you can cancel and get earnest money back.

The appraisal contingency window.

If the home appraises below the contract price and you can't resolve the gap with the seller, you can cancel and get earnest money back.

The loan contingency window.

Usually 21-30 days. If you can't get final loan approval (the lender denies you despite the pre-approval), you can cancel and get earnest money back.

Title issues.

If the title search reveals problems (liens, ownership disputes) that the seller can't clear, you can cancel and get earnest money back.

Outside the contingency windows.

Once contingencies expire and you proceed, walking away from the deal for any reason that ISN'T covered by a contingency typically means forfeiting your earnest money to the seller.

The seller's breach of contract.

If the seller fails to deliver the home as agreed (refuses to make agreed repairs, removes fixtures that were supposed to stay, etc.), you can usually cancel and get earnest money back AND potentially sue for damages.

What forfeit actually looks like

You don't lose the money automatically. The earnest money is in escrow. To release it to the seller, BOTH parties (you and the seller) typically have to sign a release form. If you disagree about whether the seller is entitled to the earnest money, it sits in escrow until either you both sign a release, you get a court order, or the escrow company files a legal action to determine ownership.

This is why bad-faith earnest money disputes get expensive fast for both parties.

How to protect your earnest money

Read your contract.

Especially the contingency timelines and the cancellation provisions. I walk through this with you before you sign.

Hit your deadlines.

The inspection contingency expires on a specific date. So does the loan contingency. Missing a deadline by one day can change your rights. We track this together in escrow.

Communicate in writing.

If you're cancelling under a contingency, the cancellation has to be in writing within the contingency period. Verbal doesn't count.

Don't waive contingencies casually.

In competitive markets, buyers sometimes waive their inspection contingency or appraisal contingency to strengthen offers. Doing so eliminates your protection on those issues. Sometimes worth it. Sometimes not. Always discuss.

The "non-refundable earnest money" structure

In very hot markets, sellers sometimes ask for earnest money to be released to them BEFORE closing as non-refundable. This means the money goes to the seller immediately at offer acceptance and the buyer can't recover it even under standard contingency cancellations.

This dramatically shifts risk to the buyer. I generally advise against it unless the buyer has rare reasons (cash, no inspection planned, no appraisal needed).

Frequently asked

Do I write a check for earnest money or wire it?

Usually a personal check or cashier's check delivered to the title company within 24-72 hours of offer acceptance. Some title companies accept wires. Confirm with the title company.

What if I write a personal check and the bank rejects it?

Your earnest money obligation is unfulfilled. The seller can cancel the contract. Use a cashier's check if you're not sure your personal account can cover it.

Can I use a credit card?

Title companies typically don't accept credit cards for earnest money. Personal check, cashier's check, or wire.

What if the deal closes? Do I get the earnest money back?

No, it's credited toward your down payment at closing. You see it on the closing disclosure as a credit to you.

What if the deal falls through during the inspection? How long until I get my money back?

Once both parties sign the cancellation release, the title company typically releases the funds within 5-10 business days.

Can the seller demand more earnest money during the transaction?

No. The amount is set in the original contract. Additional deposits would require a contract amendment that both parties sign.