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JARGON MADE SIMPLE SERIES - Earnest Money

Jargon

JARGON MADE SIMPLE SERIES - Earnest Money

 
Real estate can feel overwhelming with all the acronyms and industry terms. Our Jargon Made Simple series breaks down complex concepts into clear, everyday language, so whether you’re buying or selling in Bend and Central Oregon, you can make confident decisions without the confusion.
What is a Earnest Money?
"The deposit that shows you’re serious."
 
Buying a home involves a lot of moving parts, and just as many new terms. One of those is earnest money, often called a “good faith deposit.” But what does it really mean, and why does it matter?
 
Earnest money is a sum of money a buyer puts down to show they’re serious about purchasing a home. Think of it as a gesture of commitment, a way to say, “I’m not just browsing; I really want this house.”
 
Typically, the earnest money deposit is around 1–2% of the home’s purchase price, though it can vary depending on the market and location. This deposit is usually submitted shortly after the seller accepts the buyer’s offer and is held in escrow (a neutral third-party account) until closing.
 
If the sale goes smoothly, that deposit doesn’t disappear. Instead, it’s applied toward your down payment or closing costs, helping reduce the amount you’ll need to bring to the closing table.
 
But what happens if the deal falls through? That depends on the circumstances. If a buyer backs out because of a valid reason covered by a contingency (like issues discovered during inspection or financing not coming through), the earnest money is typically refundable. However, if the buyer simply changes their mind or misses a deadline without a valid contingency, the seller may keep the deposit as compensation for taking the home off the market.
 
In short, earnest money protects both sides:
 
For buyers, it helps show commitment and strengthens the offer.
 
For sellers, it offers some security that the buyer is serious.
 
So while it might seem like just another expense, earnest money is really about trust and intent, two essential ingredients in every real estate transaction.
All information deemed reliable but not guaranteed. If your property is listed with a real estate broker, this is not a solicitation of brokerage services. Laura Blossey, License 201204340, Avenir Realty.
 
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1051 NW Bond St., #410
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