What is earnest money?

What is Earnest Money?

When buying a home in Portland, one term you’ll hear early in the process is “earnest money.” It’s an important part of nearly every real estate transaction, yet many buyers aren’t fully clear on what it means—or why it matters.

The Basics

Earnest money is a good faith deposit that a buyer provides after their offer on a home is accepted. Think of it as a way to show the seller you’re serious about moving forward. In Portland, the amount typically ranges from 1% to 3% of the purchase price, depending on market conditions, competition, and negotiations.

How It Works

• Held in Escrow: The funds don’t go directly to the seller; they’re placed in an escrow account until closing.

• Applied to Your Purchase: At closing, your earnest money is credited toward your down payment or closing costs.

• Refundable in Some Cases: If you back out of the sale for reasons covered in the contract—such as inspection, appraisal, or financing contingencies—you may get your earnest money refunded.

Why It Matters in Portland’s Market

Portland buyers face a competitive environment where sellers often have multiple offers to consider. A strong earnest money deposit signals that you’re committed and financially ready, which can make your offer more appealing. On the flip side, not including enough earnest money can make your offer seem weak.

The Risk

If you back out of the deal for reasons not protected by your contract, you could forfeit your earnest money to the seller. That’s why having an experienced Portland Realtor on your side is key to protecting your investment.

So What?

Understanding earnest money isn’t just about knowing a definition—it’s about protecting your hard-earned savings while strengthening your position as a buyer. In today’s Portland real estate market, the right earnest money strategy can be the difference between winning your dream home or watching it go to someone else.

If you’re thinking about buying a home in Portland and want clear guidance through every step—from earnest money to closing—I’d love to help.