Earnest Money in Seattle: How It Works

Wondering how much earnest money you should put down on a Seattle home? You are not alone. This deposit can feel confusing, especially in a fast-moving market. The good news is that once you understand how it works, you can make confident choices and protect your funds. In this guide, you will learn typical amounts in King County, when earnest money is refundable, and the steps to keep your deposit safe. Let’s dive in.

What earnest money means in Seattle

Earnest money is a buyer’s good-faith deposit you pay after your offer is accepted. It signals you are serious and plan to follow through. At closing, it is credited toward your down payment and closing costs.

The deposit also gives the seller a potential remedy if you breach the agreement without a valid reason under the contract. Whether you get it back depends on the contingencies you include and your deadlines.

Who holds the funds and when you deposit

In the Seattle area, a neutral third party typically holds your deposit. That is usually a title or escrow company, an attorney trust account, or sometimes a brokerage trust account. The exact holder is specified in your purchase-and-sale agreement.

Local contracts commonly require you to deposit earnest money within a few business days after both parties sign the agreement. The deadline should be written into your offer. If you miss it, the seller may treat that as a breach, depending on the contract language.

How much earnest money to offer

There is no one-size-fits-all number, but you will often see these patterns in Seattle and King County:

• Typical guidance is about 1% to 3% of the purchase price. The exact figure varies by price point and competition.
• For lower-priced condos, buyers often deposit a few thousand dollars, such as 2,000 to 5,000 dollars.
• For higher-priced single-family homes, deposits commonly rise to several thousand dollars or more.

In highly competitive situations, some buyers increase their deposit to 3% to 5% to stand out. Others keep the deposit modest and strengthen their offer with shorter timelines or other terms. Your strategy should match your comfort with risk and the specific listing.

Quick examples by price point

• 400,000 dollar home: 1% is 4,000 dollars; 2% is 8,000 dollars.
• 800,000 dollar home: 1% is 8,000 dollars; 2% is 16,000 dollars.

Local norms can vary by property type and neighborhood. A downtown condo may see different practices than a single-family home in Ballard, Capitol Hill, Fremont, or West Seattle. Lean on local guidance to tailor your offer.

When earnest money is refundable

Your deposit is refundable only if you cancel under a valid contract contingency or provision. Once you waive a contingency or miss a deadline, your protection is limited or lost.

Common contingencies that protect you

• Inspection contingency: Lets you cancel within the inspection period if you cannot reach a repair or credit agreement after you object to findings.
• Financing contingency: Protects you if your agreed loan type or terms do not come through within the financing period.
• Appraisal contingency: Applies if the appraisal is below the purchase price and you choose to cancel under the contract.
• Title contingency: Covers unresolvable title issues the seller will not cure.
• HOA or condo document review: Allows cancellation if the documents reveal unacceptable issues within the allowed review window.
• Sale-of-home contingency: Protection depends on the specific terms you negotiate.

What happens if you breach

If you cancel without an applicable contingency, the seller may keep your earnest money as liquidated damages if the contract says that is the remedy. Some contracts also allow the seller to pursue other legal remedies, but many limit recovery to the earnest money unless different terms are negotiated. Read the exact language in your agreement and get clarity before you sign.

How funds are released

Most agreements require a written mutual release to disburse funds if the transaction cancels. If there is a disagreement, the escrow holder will keep the funds until a signed release, court order, or arbitration award instructs them to release the money. At closing, the deposit is credited toward your costs.

Steps to protect your deposit

Follow these practical steps to reduce risk and keep your earnest money safe:

1. Confirm the holder in writing. Know the name of the title or escrow company and the trust account where your funds will be held.
2. Meet the deposit deadline. Calendar it, send the funds on time, and ask for a written receipt from escrow.
3. Track every contingency date. Keep a clear written list and set reminders for your inspection, financing, appraisal, and other deadlines.
4. Give written notice to cancel. If you need to back out under a contingency, follow the contract’s written notice procedure. Do not rely on verbal messages.
5. Guard against wire fraud. Verify wiring instructions by phone using a known phone number from the escrow company. Be wary of any email asking you to change instructions.
6. Do not remove protections too early. Avoid signing to remove contingencies until inspections and financing checks are complete.
7. Keep evidence. If you rely on a financing contingency, save lender emails and denial letters in case a dispute arises.

Smart questions to ask

• Where exactly will my earnest money be held, and under what account name?
• What is the deposit deadline, and how will we verify receipt?
• Which contingencies are included, what are the timelines, and what notices preserve my rights?
• If we cancel under a contingency, what steps are needed to get funds returned?
• What dispute resolution terms apply in our contract?

Mistakes first-time buyers should avoid

• Waiving key contingencies in a bidding war without understanding the risk to your deposit.
• Missing the earnest money deposit deadline or a contingency deadline.
• Sending a wire based only on email instructions without verbal verification.
• Handing a check to a seller or listing agent instead of depositing with a neutral escrow holder.

Real-world scenarios in Seattle

• Scenario A: Your 700,000 dollar offer includes a 1.5% deposit of 10,500 dollars with a 10-day inspection and 21-day financing contingency. The inspection reveals issues, and you cancel within the inspection period. Your deposit is refunded.
• Scenario B: A hot listing gets multiple offers. You offer a 3% deposit and shorten your inspection period to be more competitive. If you later remove the inspection contingency and then walk away, your deposit may be forfeited.
• Scenario C: You remove the financing contingency early. The loan later falls through. Because you no longer have financing protection, your earnest money is at high risk and the seller may keep it.

Your timeline at a glance

• Offer accepted: The clock starts on your deposit and contingency periods.
• Deposit due: Typically within a few business days after mutual acceptance. Confirm receipt.
• Inspection period: Complete inspections, negotiate repairs or credits, or cancel within the deadline.
• Appraisal and financing: Work closely with your lender to meet financing and appraisal timelines.
• Contingency removal: Remove protections only when you are sure. Missing a deadline can remove protection automatically.
• Closing: Your earnest money is credited to your closing costs or down payment.

Final thoughts

Earnest money can strengthen your offer and still be safe if you follow your contract and deadlines. The right amount and terms depend on the home, the market, and your risk tolerance. A local, hands-on strategy helps you balance competitiveness with protection.

If you want a clear plan for your next offer in Seattle or greater King County, reach out to Taylor, Love & Co.. We will walk you through amounts, contingencies, and timelines so you can move forward with confidence.

FAQs

How fast do I need to deposit earnest money in King County?

• Local contracts typically require the deposit within a few business days after mutual acceptance, with the exact deadline stated in your offer.

What is a typical earnest money amount in Seattle?

• Many buyers use 1% to 3% of the purchase price, though actual amounts vary by price tier, property type, and competition.

Is earnest money separate from my down payment in Washington?

• Yes, it is a deposit held in trust during the transaction and then credited to your down payment or closing costs at closing.

Who holds my earnest money in a Seattle purchase?

• A neutral third party usually holds the funds, such as a title or escrow company, an attorney trust account, or sometimes a brokerage trust account.

When can a seller keep my earnest money in Seattle?

• If you breach the contract without a valid contingency or miss key deadlines, the seller may keep the deposit as liquidated damages if the contract provides for that remedy.

How do I avoid wire fraud when sending earnest money in King County?

• Always confirm wiring instructions by phone using a known number from the escrow or title company, and never rely solely on email instructions.