How Much Earnest Money Should the San Mateo Home Buyer Put Down?

By Raymond Stoklosa · June 9th, 2008

San Mateo real estate earnest money
Here’s a question I get all the time from both buyers and sellers: How much should the buyer put up as an earnest money deposit?

First off, let’s start with the basic question – what is an earnest money deposit? Earnest money is an amount of money that the buyer gives to the escrow agent, after making an offer on the property, to demonstrate a serious intention to purchase the seller’s property. The amount is one way for the buyer to convey their sincerity in closing the transaction.

The earnest money deposit is a prepaid portion of the buyer’s total down payment. The money is held in the escrow company’s trust account and typically is refundable (if and when the buyer chooses to cancel the transaction within the contingency period). However, once the contingencies have been removed, the buyer can lose this deposit should they fail to close the transaction – although that is not automatic. So, from the seller’s viewpoint, earnest money is the buyer’s at risk money should the buyer breach the contract.

In San Mateo County, deposits are commonly not more than 3% of the purchase price, but they do vary. A competent agent can explain to you the nuisances and help you determine the right amount for your situation.

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