Earnest Money in Washington Real Estate

If you’re buying or selling a home in Washington, one key part of the transaction you’ll encounter is earnest money. This good faith deposit shows that the buyer is serious about purchasing the property and provides security to the seller. But how does it actually work, and what happens if the deal falls through?

This guide explains everything buyers and sellers need to know about earnest money in Washington real estate—from typical amounts to refund rules.

What Is Earnest Money?

Earnest money is a deposit made by the buyer after mutual acceptance of the purchase and sale agreement. It signals commitment to the transaction and compensates the seller for taking the home off the market.

The funds are typically held in escrow until closing. If the sale proceeds, the earnest money is applied toward the buyer’s down payment or closing costs.

🔗 Related glossary terms: Escrow, Mutual Acceptance, Contingency Clause.

How Much Is Earnest Money in Washington?

Earnest money amounts vary but usually range from 1% to 3% of the purchase price. In competitive Seattle markets, buyers may offer higher deposits to stand out.

For example:

$5,000–$10,000 for mid-range homes

$20,000+ for higher-end homes

When Is Earnest Money Paid?

Earnest money is usually due within two business days of mutual acceptance, though the purchase and sale agreement specifies the exact timeline. Prompt payment is critical to avoid breach of contract.

Who Holds the Earnest Money?

In Washington, earnest money is generally deposited with:

An escrow company

A real estate brokerage trust account

The funds remain in escrow until closing or cancellation of the contract.

When Can Earnest Money Be Refunded?

Earnest money is refundable under certain conditions, usually tied to contingencies:

Inspection Contingency – if the buyer withdraws based on inspection findings.

Financing Contingency – if the buyer cannot secure financing.

Appraisal Contingency – if the property appraises below the purchase price and renegotiation fails.

Title Issues – if ownership cannot be transferred cleanly.

🔗 Related glossary terms: Inspection Contingency, Appraisal Contingency, Title Insurance.

When Can the Seller Keep Earnest Money?

If a buyer backs out for reasons not covered by contingencies, the seller may keep the earnest money as compensation for lost time and market exposure.

Examples include:

Buyer simply changes their mind.

Buyer misses the earnest money deadline.

Buyer fails to close without a valid contingency.

Tips for Buyers

Understand the contingencies before signing.

Don’t offer more earnest money than you can risk losing.

Work closely with escrow to ensure timely payment.

Keep all deadlines on your calendar.

Tips for Sellers

Verify earnest money is deposited on time.

Understand under what conditions you may retain it.

Be prepared for disputes—sometimes escrow companies hold funds until resolution.

Use the security of earnest money to filter serious buyers.

Earnest Money and FSBO Sellers

For for-sale-by-owner (FSBO) sellers, managing earnest money requires working directly with an escrow company. This ensures compliance and protects both parties.

Pairing your sale with a flat fee MLS listing service increases visibility, helps you attract serious buyers, and ensures earnest money deposits are properly documented in the transaction.

Key Takeaways

Earnest money is a good faith deposit, usually 1–3% of the purchase price.

It’s held in escrow and applied toward closing if the sale goes through.

Refundability depends on contingencies like inspection, financing, and appraisal.

Sellers may keep it if buyers default outside of contingencies.

A flat fee multiple listing service helps FSBO sellers attract serious buyers while saving on commission.

By understanding how earnest money works in Washington real estate, buyers and sellers can protect themselves and keep transactions moving smoothly.

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