Is Earnest Money Refundable When Buying a House?

Often yes, but only if you back out for a reason your contract protects and you follow the deadlines. If you cancel under an open contingency, like inspection, financing, or appraisal, you can usually get your deposit back. If you walk away for no protected reason, or after a deadline passes, the seller may be entitled to keep it. Your contract decides, so the wording and dates matter more than any rule of thumb.

What earnest money is

Earnest money is a deposit you put down after the seller accepts your offer. It shows you're serious. It isn't an extra cost. If the sale closes, it's credited toward your down payment or closing costs. No Maryland statute sets a dollar amount. It's negotiated in the contract, and 1% to 3% of the price is a commonly cited range. Your agent can tell you what's typical for your area and price.

Maryland contracts say who holds the deposit, usually the listing broker or a title company, and when it's due after acceptance. The Maryland REALTORS contract also says that if the sale doesn't close, the deposit is released only under a written Release of Deposit agreement signed by both sides, or by other legal process.

When you can usually get it back

• Inspection contingency. If you and the seller agreed to one, you can generally cancel or renegotiate within the inspection window.
• Financing contingency. If you applied on time, did what the lender asked, and the loan is denied, the contract generally provides that the deposit is returned to you. Written proof from the lender is typically required.
• Appraisal contingency. If the appraisal comes in low and the contract allows you to terminate, you can often cancel within the deadline. See my post on what a ,000 appraisal gap means.
• The seller defaults. If the seller can't or won't perform, the deposit is normally returned.

When you can lose it

1. You miss a deadline. Contracts usually say time is of the essence. A contingency only protects you while it's open.
2. You waived a contingency. Waiving the appraisal or inspection to win an offer means you lose that exit.
3. You change your mind. Cold feet isn't a contingency.
4. You don't follow the financing steps. Not applying for the loan on time can cost you the protection.

Some contracts treat the deposit as the seller's limit for damages if the buyer defaults, while others allow more. Ask your agent which applies.

How to ask for it back

Maryland has a legal process for requesting your deposit after you terminate under a contingency. In general, you send written notice to the seller and the deposit holder, and the seller has a short window to object. Timing rules have been updated recently, so confirm the current steps with your agent or the title company. Keep everything in writing and send it before your deadline.

How to protect yourself

• Put every deadline on your calendar the day you go under contract.
• Ask your agent which contingencies you have and when each ends.
• Don't waive protections unless you understand the worst case in dollars.
• Send notices in writing, not just by phone.
• Pick a deposit you could afford to lose if something went wrong.

FAQ

How much is earnest money on a $400,000 house?

Using the commonly cited 1% to 3% range, that's about $4,000 to $12,000. It's negotiable, so ask your agent.

Who holds the money?

Usually the listing broker or a title company, in an escrow account.

Can the seller keep it if I'm denied a loan?

If you have a financing contingency and followed it, the deposit is generally returned. Without one, it may be at risk.

Does the deposit come off what I owe at closing?

Yes. It's credited to you at settlement.

Is the deposit the same as a down payment?

No, but it's applied toward it when you close.

Next step

Buying in Maryland or DC? Start with my buyer resources, or contact me. Want to talk it through? Grab a free 15-minute call at calendly.com/michaelwaderealtor/15min. No pressure.