Earnest money trips up almost every buyer the first time around. You write a check before you’ve even closed, and it’s not always clear where that money goes or when you’ll see it again. So let’s clear it up.
What it actually is
Earnest money is a deposit you put down shortly after your offer is accepted, showing the seller you’re serious. In the Nashville market, it typically runs 1 to 2 percent of the purchase price, though it can vary by deal.
Where it goes
It doesn’t go to the seller. It gets held by a neutral third party, usually a title company or an attorney’s escrow account, until closing. At closing, it’s applied toward your down payment and closing costs. It’s not an extra expense on top of what you already owe. It’s money you were putting toward the purchase anyway.
When you get it back
If you back out of the deal for a reason covered by your contract, you get it back. The most common protections are the inspection contingency, the financing contingency, and the appraisal contingency. If the inspection turns up something you can’t live with, if your loan falls through, or if the appraisal comes in low and the seller won’t budge, you’re typically entitled to a full refund as long as you act within the contract’s deadlines.
When you don’t
If you walk away from the deal for a reason not covered by the contract, or after your contingency deadlines have passed, the seller can potentially keep it. This is usually cold feet, not something the contract protects against. It’s also why deadlines matter so much once you’re under contract. Missing an inspection or financing deadline by even a day can mean losing that protection.
The one thing to remember
Contingency deadlines are the whole game. As long as you’re paying attention to them and working with your lender and inspector on time, your earnest money is protected. It’s really about staying on schedule, not about luck.
If you’re getting ready to write an offer and want to walk through exactly what your contingencies would look like, I’m happy to talk it through!
