What Is Earnest Money and How Much Should I Put Down in San Diego?

What Is Earnest Money?

Earnest money — also called a good faith deposit — is the initial cash deposit a buyer provides when submitting an offer on a home. It signals to the seller that you are a serious, committed buyer. The funds are held in escrow and applied toward your down payment or closing costs at the close of escrow.

How Much Earnest Money Is Standard in San Diego?

In San Diego, the standard earnest money deposit is typically 1 to 3 percent of the purchase price. On an $800,000 home, that means $8,000 to $24,000. In highly competitive multiple-offer situations, buyers sometimes offer 3 percent or more to signal serious commitment. A larger deposit demonstrates financial strength and conviction.

When Is the Earnest Money Due?

• Initial deposit: Typically due within 3 business days of offer acceptance — delivered to escrow
• Increased deposit: Many contracts call for an increased deposit after the contingency removal period — typically bringing the total to 3 percent of the purchase price
• The initial deposit is the amount at risk if you cancel without valid contingency protection

What Happens to Your Earnest Money If You Cancel?

• Cancel within contingency period for a valid reason: Full refund of your deposit
• Cancel after all contingencies are removed without cause: Seller may claim your deposit as liquidated damages
• Seller defaults or cannot perform: Full refund of your deposit
• Deal closes successfully: Applied toward your down payment or closing costs

Protecting Your Earnest Money

Your earnest money is protected as long as you cancel during an active contingency period for a legitimate reason. This is why understanding your contingencies — and the deadlines associated with them — is critical. Rieder Homes Group tracks every contingency deadline for our buyer clients and ensures they are never caught in a position where their deposit is at unnecessary risk.

Related Reading on RiederHomes.com:

→ Blog #86: Making an Offer

→ Blog #89: What Contingencies to Include

→ Blog #95: Can I Back Out After Making an Offer?

→ Blog #88: Multiple Offer Situations

— Mance Rieder, Broker Associate | Rieder Homes Group | REAL Broker | riederhomes.com | 858-295-0556