You found a Redmond home you love. Now the seller wants to see you are serious. That is where earnest money comes in. It can strengthen your offer, protect your timeline, and, if handled poorly, put real dollars at risk. In this guide you will learn what earnest money is, how it works in Washington, typical amounts on the Eastside, and the smart ways to use it in a competitive market. Let’s dive in.
What is earnest money
Earnest money is a good‑faith deposit you make when your offer is accepted. It shows the seller you plan to follow through and it ties you to the contract terms. In Washington, the purchase and sale agreement includes a specific line for the deposit amount, where it will be held, and when it must be delivered.
These funds are usually held by an escrow or title company in a trust account, or in a broker’s trust account, based on the contract. At closing, your earnest money is typically applied to your down payment and closing costs. If you do not close because you breach the contract after protections are removed, the seller may be allowed to keep some or all of the deposit based on the agreement.
How much in Redmond
Across the U.S., a common range is a few hundred to a few thousand dollars, or about 1 to 3 percent of the purchase price. On the Eastside, practice shifts with market conditions.
For entry to mid‑price Redmond homes, deposits are often a few thousand dollars, for example $2,000 to $10,000. For higher‑priced homes or multiple‑offer situations, deposits frequently land in the mid‑five figures or around 1 to 3 percent of the price. In very competitive moments some buyers offer 3 to 5 percent.
Here are simple illustrations, not recommendations:
- $800,000 purchase at 1 percent = $8,000.
- $800,000 purchase at 3 percent = $24,000.
- $1,200,000 purchase at 2 percent = $24,000.
Factors that affect your amount
- Market competitiveness and multiple offers.
- Seller expectations and listing strategy.
- Your financing type and strength, such as cash or jumbo loan.
- Which contingencies you include and for how long.
- Property condition or any seller request for a larger deposit.
When it is refunded vs forfeited
Your contract controls what happens to your deposit. Many Washington agreements allow the buyer to receive a refund if you cancel within an active contingency period and follow the notice rules. Common examples include inspection, financing, appraisal, title, or sale‑of‑home contingencies.
If you remove contingencies or let deadlines pass, your earnest money becomes more exposed. If you later fail to perform, the seller may claim the deposit as damages, subject to the contract. Some Washington agreements include an optional liquidated damages clause that sets earnest money as the seller’s sole remedy up to a cap if the buyer defaults. If a seller seeks more than the deposit, they usually need to pursue legal action.
How escrow holds and releases funds
Escrow or the holding broker follows the written instructions in the contract. If there is a disagreement, the holder typically keeps the funds in trust until both parties sign release instructions or a court or arbitrator orders a release. This is why clear contract timelines and written notices matter.
Contingencies that protect you
Contingencies give you time to verify the home and your financing without risking your deposit.
- Inspection contingency. If you cancel within the inspection period as allowed by the contract, your deposit is usually refundable.
- Financing contingency. If your lender cannot approve the loan in time and you notify the seller as required, the deposit is typically refundable.
- Appraisal contingency. If the appraisal comes in below the purchase price, you can often renegotiate, bring extra cash, or terminate with a refund if the contract allows.
- Title contingency. Unresolved title defects can be a basis to terminate and receive a refund.
- Sale‑of‑home contingency. Less common in hot markets, but if included and properly exercised, it can protect your deposit.
Timeline example
Imagine you deposit $10,000 and have a 10‑day inspection period and a 21‑day loan commitment deadline. If you cancel on day 8 due to an inspection issue and follow the notice steps in the contract, the $10,000 should be refunded. If you remove inspection on day 10, then fail to secure financing and do not give notice by the loan deadline, the seller may claim the deposit.
Competitive offer strategies
When Redmond inventory is tight, buyers use tactics that improve odds. Each tactic affects your risk profile.
- Larger deposit. Moving from $10,000 to $30,000 signals strength. Your deposit remains refundable only under the contract’s contingencies, but a larger amount increases potential loss if you default.
- Shorter contingency periods. Cutting a 10‑day inspection to 5 days or a 21‑day loan period to 14 gives the seller faster certainty. You have less time for due diligence.
- Appraisal gap coverage. You agree to cover an appraisal shortfall up to a set amount, such as $10,000. This reassures the seller but requires extra cash readiness.
- Cash or as‑is framing. Removing a financing contingency or signaling no repair requests is compelling to a seller. Without protections, your deposit is more exposed.
- Escalation clause. Your price increases to beat competing offers up to a capped amount. This can keep your deposit moderate while staying competitive, but the clause must be drafted carefully.
- Flexible closing or rent‑back. Aligning with the seller’s timing often wins deals with lower risk than removing protections. Terms should be clear on possession, insurance, and any deposits.
Stronger earnest money or shorter timelines can help win the house, but they also increase your exposure. Always align strategy with your risk tolerance and your lender’s capacity.
How to draft a safer offer
Use this checklist to balance strength and protection:
- Set a deposit you are comfortable risking if protections are removed.
- Confirm the deposit holder, delivery timeline, and form of funds.
- Keep inspection, financing, and appraisal timelines realistic for your lender and inspectors.
- Track all deadlines on a shared calendar and deliver notices in writing.
- Save supporting documents for any termination, such as an inspection report or lender letter, to support a refund.
- Discuss liquidated damages language with your agent so you understand remedies if something goes wrong.
Common mistakes to avoid in Redmond
- Delivering the deposit late or to the wrong place. This can create a breach and harm your negotiating leverage.
- Waiving key protections before due diligence is complete. Pre‑inspections and lender readiness can help you shorten periods without guessing.
- Confusing appraisal with financing approval. A low appraisal without a plan to bridge the gap can jeopardize the deposit if protections are gone.
- Letting deadlines pass silently. If you need more time, request an extension in writing before a deadline expires.
Quick math guide
Use these examples to scale your offer. These are illustrations only.
- 1 percent of $800,000 = $8,000.
- 3 percent of $800,000 = $24,000.
- 5 percent of $800,000 = $40,000.
- 2 percent of $1,200,000 = $24,000.
If the market is calmer, you may see smaller deposits. In a bidding war, expect larger figures or tighter timelines. The right number depends on your strategy and comfort with risk.
Work with a local guide
The right earnest money strategy can help you win the home and protect your budget. You deserve a plan that fits Redmond’s market and your comfort with risk. If you want help balancing deposit size, contingency timing, and lender readiness, reach out for a one‑on‑one consult with Carla Marsh. We will walk through your goals, tailor a strategy, and prepare you to act with confidence.
FAQs
What is earnest money in Washington home purchases
- It is a good‑faith deposit paid after mutual acceptance that shows commitment, is held by escrow or a broker per the contract, and is usually credited to you at closing.
How much earnest money do Redmond buyers usually put down
- Amounts vary with price and competitiveness, often a few thousand dollars for mid‑price homes and roughly 1 to 3 percent for higher‑priced or multiple‑offer situations.
Who holds my earnest money once my offer is accepted
- Typically an escrow or title company holds it in a trust account, though a broker’s trust account may hold it if the contract specifies.
When is earnest money refundable for Redmond buyers
- It is usually refundable if you cancel within an active contingency period, such as inspection or financing, and you follow the contract’s notice and timing rules.
What happens if there is a dispute over releasing earnest money
- The holder generally keeps funds in trust until both parties sign release instructions or a court or arbitrator issues an order that directs the release.
Can I use earnest money for my closing costs
- Yes, in most cases it is applied to your down payment and closing costs at closing, as outlined in your purchase and sale agreement.
