Congratulations! Your offer has been accepted.
Now your REALTOR® is asking you to submit an earnest money deposit, and if you're like many buyers—especially first-time buyers—you may be wondering exactly what that means.
How much should you put down?
Who holds your money?
What happens if the inspection uncovers major problems?
Can you lose your deposit?
These are all excellent questions, and understanding the answers before delivering your earnest money can help you move through the transaction with much more confidence.
What Is Earnest Money?
Earnest money—sometimes called an Earnest Money Deposit (EMD) or good-faith deposit—is money a buyer deposits after their offer has been accepted to demonstrate they're serious about purchasing the property.
It isn't an additional fee.
If your purchase closes successfully, your earnest money is typically credited toward your down payment, closing costs, or purchase price.
If this is your first home purchase, understanding earnest money is just one part of the process. My First-Time Homebuyer Guide walks you through everything from getting pre-approved to receiving your keys.
Think of it as showing the seller that you're committed to completing the transaction while both parties work through inspections, financing, title work, and all of the other steps involved in buying a home.
Who Holds Your Earnest Money?
Many buyers assume the seller receives the earnest money immediately.
In Michigan, that's generally not how the process works.
Instead, the deposit is typically held in a neutral escrow account until closing.
Depending on the purchase agreement, that escrow account may be managed by:
- A real estate brokerage
- A title company
- A closing agency
- An attorney's trust account
Your purchase agreement should clearly identify who is holding the funds and explain how the earnest money can be released if circumstances change. If you're unfamiliar with the role a title company plays during the closing process, I explain it in more detail in Title Insurance In Michigan: East Lansing Buyer's Guide.
I also encourage buyers to obtain a receipt showing when the earnest money was delivered and deposited. Keeping good documentation throughout the transaction helps avoid misunderstandings later.
How Much Earnest Money Should You Offer?
One of the most common questions I receive is:
"How much earnest money should I put down?"
The honest answer is...
It depends.
There isn't a required amount under Michigan law.
The appropriate deposit depends on several factors, including:
- The purchase price
- Current market conditions
- Whether multiple offers are expected
- Your financing
- Seller expectations
- The strength of the overall offer
In a highly competitive market, offering a stronger earnest money deposit can help demonstrate your commitment.
In a slower market, a smaller deposit may still be perfectly appropriate.
One thing I enjoy most is helping buyers understand the strategy behind each offer. Earnest money isn't about risking more money than necessary—it's about presenting an offer that gives the seller confidence while still protecting your interests.
What Protects Your Earnest Money?
One of the biggest misconceptions I hear is that once you write an earnest money check, you've automatically lost it if something goes wrong.
That's simply not true.
Your purchase agreement contains contingencies that help protect both buyers and sellers throughout the transaction.
Some of the most common contingencies include:
- Home inspection contingency
- Financing contingency
- Appraisal contingency
- Title contingency
- Sale of current home contingency (when applicable)
- Property-specific contingencies such as well, septic, environmental, or other inspections
These protections give buyers time to complete their due diligence before moving forward with the purchase.
Deadlines Matter
One of the biggest mistakes buyers can make is assuming contract deadlines are flexible.
They're not.
Every purchase agreement includes important deadlines for inspections, financing, appraisals, title review, and other contingencies. Missing one of those deadlines can affect your rights under the contract and, in some situations, put your earnest money at risk.
That's one reason I stay in close communication with my clients throughout the transaction. Keeping track of important dates and making sure documents are submitted on time helps prevent small issues from becoming much bigger problems.
When Do You Get Your Earnest Money Back?
Fortunately, most real estate transactions close successfully, and your earnest money simply gets credited toward your purchase at closing.
However, there are situations where a buyer may also receive their earnest money back before closing.
For example:
- The inspection uncovers major concerns and the contract is properly terminated.
- Financing cannot be obtained despite meeting the financing contingency requirements.
- The appraisal contingency cannot be satisfied.
- A significant title issue cannot be resolved.
- Another contract contingency allows the buyer to terminate the agreement.
The important part is following the purchase agreement exactly as written. Timing, documentation, and written notices all matter.
Can You Lose Your Earnest Money?
The short answer is...
Yes—but it's much less common than many buyers fear.
Most situations where buyers lose earnest money involve failing to meet contractual obligations after contingency periods have expired or choosing to walk away from the transaction without a contractual reason.
That's why understanding your purchase agreement before signing is so important.
One thing I always tell my clients is that asking questions early is much easier than trying to solve problems later. I want my buyers to fully understand their rights, responsibilities, and timelines before we ever submit an offer.
Tips For Protecting Your Deposit
There are several simple ways buyers can help protect their earnest money throughout the transaction.
I recommend:
- Getting pre-approved before writing an offer.
- Choosing an earnest money amount that's appropriate for the home and current market conditions.
- Keeping contingency deadlines organized.
- Reading every document before signing.
- Communicating concerns immediately.
- Working closely with your lender, title company, and REALTOR® throughout the transaction.
A well-prepared buyer is far less likely to encounter problems than someone rushing through the process.
Earnest Money For New Construction And Vacant Land
Builder contracts and vacant land purchases often handle earnest money differently than a traditional resale home.
Some builders require larger deposits or multiple deposits throughout the construction process. Vacant land purchases may also include additional contingency periods related to soil evaluations, well and septic inspections, environmental reviews, or financing requirements.
Because these contracts can differ significantly from standard residential purchase agreements, I always encourage buyers to fully understand the builder's or seller's requirements before signing.
Having spent years working alongside a custom home builder, I've seen firsthand how construction contracts often differ from traditional home purchases. Helping buyers understand those differences is one of the ways I work to make the process less intimidating.
Final Thoughts
Earnest money is a normal part of purchasing a home in Michigan.
Rather than looking at it as something to fear, think of it as one piece of a well-written purchase agreement that helps protect both the buyer and the seller.
When the contract is structured properly, deadlines are followed, and communication remains strong, earnest money simply becomes another step toward a successful closing.
Whether you're purchasing your first home or your fifth, understanding your contract before writing an offer is one of the best ways to protect both your investment and your peace of mind. No matter where you're searching, taking the time to understand the process upfront can help you avoid unnecessary stress later.
If you're preparing to purchase a home, I'd be happy to help you understand the offer process, explain how earnest money works, and create a strategy that protects your interests while giving your offer the strongest possible chance of success.
Continue Exploring Home Buying Resources
If you're preparing to buy a home in Greater Lansing, these additional guides can help you better understand the process before writing your first offer.
- First-Time Homebuyer? Your Guide To Buying A Home In Greater Lansing, MI
- Title Insurance In Michigan: East Lansing Buyer's Guide
- Construction Loan Mortgages In Mid-Michigan
- Lansing Homes For Sale
- East Lansing Homes For Sale
About The Author
Nicole Giguere is a REALTOR® with Giguere Estates, PLLC and a member of the Seguin-Sprague Team at RE/MAX Real Estate Professionals. She specializes in helping buyers, sellers, and those exploring new construction throughout Greater Lansing and Mid-Michigan.
Nicole believes informed clients make confident decisions. She takes the time to explain current market conditions, review comparable sales, and walk clients through their options so they understand not only the recommendation, but also the reasoning behind it. Whether you're purchasing your first home, selling a property, searching for vacant land, or deciding whether to build or buy, her goal is to provide honest guidance, clear communication, and a personalized real estate experience from start to finish.
If you're ready to BUILD • BUY • SELL in Greater Lansing or Mid-Michigan, Nicole would love the opportunity to help.
Nicole Giguere, REALTOR®
Giguere Estates, PLLC | Seguin-Sprague Team
RE/MAX Real Estate Professionals
📍 1755 Abbey Road, East Lansing, MI 48823
📞 (517) 242-0619
BUILD • BUY • SELL
