Buying in Seattle often moves fast. When you find the right home, you’ll be asked to put down earnest money. If you’re unsure how much to offer, where it goes, or when you can get it back, you’re not alone. In this guide, you’ll learn what earnest money is in Washington, how it’s handled in King County, and smart ways to stay competitive without taking on more risk than you intend. Let’s dive in.
What earnest money is
Earnest money is a cash deposit you make after your offer is accepted. It shows the seller you intend to follow through and is held by a neutral third party until closing. If the sale closes, your deposit is applied to your down payment and/or closing costs.
It is not a government fee. It’s part of the purchase contract and is only released according to the agreement’s terms or by written instructions from both parties or a legal order.
In Seattle’s competitive market, a solid earnest money deposit can make your offer stand out. It complements other offer terms like price, timing, and contingencies.
How much to offer in Seattle
There isn’t a single “right” number. Buyers in Seattle commonly choose either a flat-dollar deposit or a percentage of the price. A frequent range for percentage-based deposits is 1 to 3 percent of the purchase price.
Your decision should reflect:
- Competitiveness of the neighborhood and price point
- Your comfort level with risk if you remove protections
- Your lender’s documentation requirements
- The seller’s expectations based on current market activity
A larger deposit can strengthen your position, but it raises your exposure if you later default without a valid contingency. A smaller deposit reduces exposure, but may look weaker in multiple-offer situations.
Where the money is held
Your deposit is typically held by a title or escrow company in Washington. Some contracts name an independent escrow agent or a brokerage trust account, but local best practice is to use a neutral title/escrow company.
The purchase agreement sets your deadline to deliver funds after mutual acceptance. In Seattle-area transactions, you often have only a few business days. Always request a written receipt from escrow confirming the amount received and how it will be handled.
Funds stay in the escrow account until closing or until both parties give written release instructions, or a mediator, arbitrator, or court directs escrow how to disburse.
Protecting against wire fraud
Wire fraud is a real risk in real estate. Use these safeguards:
- Verify wiring instructions by calling a confirmed phone number for the title/escrow company.
- Do not rely on wiring details sent only by email without independent verification.
- Ask for immediate written confirmation from escrow when your wire arrives.
- If you write a check or use ACH, confirm clearance timelines, since some escrow holders will not release funds until they clear.
Contingencies that protect your deposit
Contingencies are contract clauses that let you cancel and keep your earnest money if certain conditions are not met. Common protections include:
- Inspection contingency: Gives you time to inspect and negotiate or cancel within the stated window.
- Financing contingency: Protects you if your loan is not approved by the deadline in the contract.
- Appraisal contingency: Applies if the appraisal comes in below the contract price and you and the seller cannot agree on a path forward.
- Title and HOA review: Lets you cancel within the allowed period if documents reveal material issues.
- Sale-of-buyer’s-home contingency: Applies when your purchase depends on selling your current property by a specified date.
Typical timelines in King County
Exact timelines are negotiated, but local patterns are common:
- Inspection period: Often several days up to two weeks. Buyers sometimes shorten this to be more competitive.
- Financing period: Commonly 21 to 30 days, depending on your lender and loan program.
- Appraisal: Usually ordered early and often completed inside the financing period.
- Closing date: Frequently around 30 days from mutual acceptance, but it varies by transaction.
To keep your earnest money protected, you must follow each contingency’s notice rules and deadlines precisely.
When your earnest money is refundable
Your deposit is generally refundable if you cancel under a valid contingency and deliver the required written notice within the contract’s deadlines. For example, if your inspection reveals concerns and you terminate within the inspection period according to the agreement, you typically receive your deposit back.
It is usually at risk if you default after removing contingencies or miss a required deadline without a valid contingency. In that case, the seller may be entitled to keep the deposit, based on the remedies outlined in your contract.
Remember, escrow will not release funds without joint written instructions or a dispute-resolution decision.
If a deal falls through
What happens depends on who defaults and what the contract says:
- If you cancel under a valid contingency: Your deposit is typically returned after you give proper written notice and both parties instruct escrow to release funds.
- If you default after removing protections: Many Washington contracts include a clause that allows the seller to keep the deposit as liquidated damages. Some agreements could allow other remedies, but standard forms often limit the seller’s remedy to the deposit.
- If the seller defaults: You are usually entitled to your earnest money back and may have other remedies available under the contract.
Earnest money disputes are often resolved by negotiation. If parties cannot agree, contracts commonly call for mediation, arbitration, or court to decide. Escrow relies on the contract and will hold funds until it receives appropriate instructions or an order.
Also note that third-party costs like inspections, appraisal, and loan application fees are generally non-refundable, even if you recover your earnest money.
Smart strategies for Seattle buyers
You can build a stronger offer while keeping sensible protections:
- Offer a larger deposit but keep key contingencies: You can show commitment without giving up major safeguards.
- Shorten timelines instead of waiving protections: A shorter inspection or financing period can be attractive while still protecting your deposit.
- Consider a staged deposit schedule: Propose an initial earnest money amount with an additional deposit due upon removal of specific contingencies. This must be clearly written into the contract if used.
- Document everything: Use written notices and follow the contract’s methods and deadlines for delivery.
- Coordinate with your lender early: Ask what documentation they need to verify your earnest money and how it will be credited at closing.
- Plan your cash flow: If using a large deposit, set aside those funds in case the transaction is delayed or the deposit is temporarily held during a dispute.
- Verify wiring instructions: Call the escrow company before sending any funds to avoid fraud.
What to expect at closing
If the sale closes, your earnest money is applied to the amount you need to bring to closing. This appears on your final settlement documents and reduces your cash due, often alongside your down payment and credits.
Ask your escrow team to confirm in writing how your deposit will appear on your closing statement and to provide the final credit details before signing.
Read your contract closely
Contract language controls the outcome. Key clauses to understand include:
- Earnest money amount and delivery deadline
- Contingencies, timelines, and notice rules
- Liquidated damages and default remedies
- Dispute resolution and escrow disbursement instructions
If you’re thinking about waiving protections to compete, talk with your lender, inspector, and your agent first so you understand the worst-case scenario for your deposit and overall finances.
Next steps
Buying in Seattle means balancing speed with protection. By choosing a thoughtful deposit amount, meeting every deadline, and keeping your key contingencies in place, you can present a strong offer and safeguard your funds. If you’d like a calm, step-by-step plan personalized to your goals, reach out to the team at FIRST AND MAIN. We’ll help you craft a competitive offer and navigate escrow with confidence.
FAQs
How does earnest money work in Seattle?
- It’s a deposit you pay after mutual acceptance to show good faith. A neutral escrow or title company holds it until closing or until both parties or a legal order directs disbursement. If the sale closes, it’s credited to your closing costs or down payment.
How much earnest money should I offer?
- Many Seattle buyers choose either a flat amount or 1 to 3 percent of the price. Pick an amount that balances competitiveness with your comfort level if protections are removed.
When can I get my deposit back?
- If you cancel under a valid contingency and follow the contract’s notice deadlines, your deposit is usually returned. If you cancel after removing contingencies, it’s often forfeited.
Who holds my earnest money?
- Typically a title or escrow company holds it in an escrow account. Some deals use a brokerage trust account or independent escrow, but neutral title/escrow is common locally.
What if the appraisal is low?
- If you have an appraisal contingency and the home appraises below the contract price, you can usually renegotiate or cancel within the timeframe to keep your deposit.
Does my lender care about earnest money?
- Yes. Lenders usually require proof of the deposit and the source of funds. Gifted funds must meet lender documentation rules.
What happens if the seller backs out?
- If the seller defaults, you typically receive your earnest money back. Your contract may also outline additional remedies available to you.
Are inspection and appraisal fees refundable?
- Generally no. Third-party costs like inspections, appraisals, and loan application fees are usually non-refundable even if your deposit is returned.
