An earnest money deposit (EMD) is a good-faith deposit — typically 1–3% of the purchase price in California — that a buyer puts into escrow after an offer is accepted, showing the seller they’re serious. It’s held by a neutral escrow company and credited toward your down payment and closing costs at closing. It’s generally refundable if you back out for a reason protected by a contingency, and at risk if you break the contract without one.
How much earnest money in California?
Most California offers include 1–3% of the price, though in competitive markets buyers sometimes offer more to stand out. On a $800,000 home, that’s roughly $8,000–$24,000. It is not an extra cost — it’s applied to your down payment and closing costs at the end.
Where the money goes
You wire the EMD to the neutral escrow or title company — never directly to the seller. It sits there until closing, when it’s credited to you, or until the contract is canceled, when escrow disburses it per the agreement.
When you get it back — contingencies
Your deposit is protected by contingencies in the purchase contract. Common ones let you cancel and recover your EMD if:
- The inspection reveals problems you won’t accept.
- The appraisal comes in below the price.
- Your loan isn’t approved within the financing contingency window.
If you cancel for a reason not covered by an active contingency — or simply get cold feet after removing them — the seller may be entitled to keep the deposit. California contracts typically cap the seller’s remedy at 3% of the price via a liquidated-damages clause.
Bottom line: Keep your contingencies in place until you’re confident, and never wire earnest money anywhere but the verified escrow company. A strong pre-approval lets you keep a tight financing contingency without risking your deposit.
Frequently asked questions
How much earnest money is required in California?
Typically 1–3% of the purchase price, though competitive markets may push it higher. It’s applied to your down payment and closing costs, not an extra fee.
Is earnest money refundable?
Generally yes if you cancel for a reason protected by an active contingency (inspection, appraisal, or financing). If you break the contract without one, the seller may keep it — often capped at 3% under California’s liquidated-damages clause.
Where does earnest money go?
Into a neutral escrow or title company’s trust account — never directly to the seller — until closing, when it’s credited to you.
When do I pay earnest money?
Usually within 1–3 business days after your offer is accepted, by wire or cashier’s check to the escrow company named in the contract.
Save Financial, Inc. — NMLS #377740, DRE #01875766. Equal Housing Opportunity. Figures are illustrative for 2026 and not an offer of credit or a guarantee of rates or approval.