The topic of earnest money comes up all the time with our buyer clients.

The rules regarding earnest money vary by state and it’s best to thoroughly read the purchase agreement to fully understand the details of how earnest money will be handled.


To begin, let’s start with the basics. Earnest money, also known as "good faith" money, is not actually required by law in the State Of Ohio. It is, however, common and expected by the seller.

It is an amount of money that a buyer offers to the seller up front and is refundable in most cases if the deal doesn’t go through.

The money doesn’t actually go directly to the seller. It goes to a title company or real estate agency that holds onto the money until closing. Then, it gets applied to the buyer’s costs.

It is basically a way for a buyer to show a seller they are committed to moving forward with the transaction.


The most common question we get involves how much money a buyer should offer as earnest money.  Unfortunately, there is not one specific answer. The general rule of thumb is 1-2% of the purchase price but it all depends on the situation.

If a buyer is in a potentially competitive situation, greater earnest money may make their offer more attractive than another buyers’.

The other terms of the offer, including price, dates and other contingencies, will also come into play. The earnest money is just one component of the overall offer, but could be deemed important by the seller.


For the most part, a buyer is entitled to their earnest money back if a transaction doesn’t go through. However, there are always exceptions. We have seen rare cases where a seller was allowed to keep all or part of the earnest money, but the circumstances here were unusual.   

As long as you follow the terms of the contract, you shouldn't have any problems. Your agent and or their manager can also provide valuable guidance during the transaction.

Although earnest money is only one small part of the transaction, it does play a big role during negotiations and should be taken seriously.