Is earnest money basically hostage money? How do I not lose it?

How do I protect my earnest money?

You want to know how earnest money works and how to protect the deposit you put down when making an offer. Earnest money shows the seller you're serious about buying their home, but you can get it back under specific conditions.

Earnest money typically ranges from 1-3% of the home's purchase price and goes into an escrow account when your offer is accepted. The money stays there until closing, when it becomes part of your down payment or closing costs. You can get your earnest money back if certain contingencies in your purchase agreement aren't met—like if the home inspection reveals major problems, your financing falls through, or the appraisal comes in too low.

Check your purchase agreement for the specific contingency deadlines and requirements. Common protections include inspection, financing, and appraisal contingencies. Each has a deadline, and you need to follow the exact process outlined in your contract to cancel and get your money back.

If you change your mind without using a valid contingency, or if you miss a deadline, the seller typically keeps your earnest money. Work with your real estate agent to track all deadlines and make sure you understand what each contingency covers and when you need to act.