What Is Earnest Money?
Earnest money — also called a good faith deposit — is money you put down when a seller accepts your offer to demonstrate that you are serious about buying the property. It is held in escrow by a title company or real estate attorney, separate from both you and the seller, until the transaction closes or falls through.
When the deal closes, your earnest money is credited toward your cash to close — reducing the amount you bring to the closing table by the deposit amount. When the deal falls through, whether you get it back depends entirely on why the deal fell through and when it fell through relative to the contract's contingency deadlines.
Earnest money is one of the most misunderstood concepts in real estate — and losing it is one of the most preventable expensive mistakes first-time buyers make in Florida.
How Much Earnest Money in South Florida?
There is no legal requirement for a specific earnest money amount in Florida — it is negotiated between buyer and seller. In practice, South Florida's norms:
| Market / Situation | Typical Earnest Money | Notes |
|---|---|---|
| Standard South Florida resale | 1–2% of purchase price | $3,500–$8,000 on a $350K purchase |
| Competitive multiple-offer situation | 2–3% of purchase price | Higher deposit signals stronger commitment |
| DR Horton new construction | $1,000–$5,000 initial + more at various contract stages | Builder-specific; not a standard resale structure |
| High-end luxury ($1M+) | 5–10% of purchase price | Sellers at this level expect meaningful commitment |
| Minimum credible amount | 1% of purchase price | Below 1% may signal weak commitment to South FL sellers |
Who Holds Earnest Money and How It Works
In Florida, earnest money is held in a neutral escrow account — typically by the buyer's agent's brokerage, a title company, or a real estate attorney. The holder is identified in the purchase contract. Key mechanics:
- Delivery deadline: The Florida contract typically requires earnest money to be delivered within 3 business days of contract execution. Missing this deadline is a material default — the seller may have the right to cancel the contract if deposit is not received on time
- Wire fraud warning: Wiring earnest money is one of the highest-risk wire transactions in real estate. Always verify wire instructions by calling the title company directly at a number you found independently — not from an email. Wire fraud targeting earnest money deposits is one of the fastest-growing financial crimes in Florida. Verify before you wire
- Cashier's check alternative: If wiring makes you uncomfortable, a cashier's check from your bank payable to the title company is equally acceptable. Deliver it in person or by overnight courier to the title company directly
- Interest: Florida law requires escrow accounts to be interest-bearing for deposits over a certain threshold. The contract specifies who receives any earned interest — typically the buyer
When You Get Earnest Money Back — The Contingency Framework
This is the most important section. Your earnest money is protected by contingencies — specific contract provisions that allow you to exit the contract and receive your deposit back if defined conditions are not met. The three main Florida contingencies:
- Inspection Period / Due Diligence Period: The most important protection. Florida contracts typically provide a 10–15 day inspection period during which the buyer can cancel for any reason and receive their full earnest money back. This is your unconditional exit window. During this period, you schedule inspections, review results, and decide whether to proceed. If you cancel during the inspection period — for any reason — your earnest money is returned in full.
- Financing Contingency: If the contract includes a financing contingency (not all do), and your loan is not approved, you can cancel and receive your earnest money back. Without this contingency, a financing failure means you forfeit the deposit. Always include a financing contingency unless you are a cash buyer
- Appraisal Contingency: If the home appraises below the purchase price and you cannot or will not make up the difference in cash, the appraisal contingency allows you to cancel and recover your deposit. Some sellers request buyers waive this — understand what you're giving up if you agree
The inspection period deadline is the most critical date in a Florida real estate contract. Once you pass it without canceling:
You are no longer entitled to a deposit refund based on inspection findings. If you discover a roof issue on Day 16 that you should have found on Day 10 — the deposit is now at risk if you try to cancel. The seller may be entitled to keep it as liquidated damages.
This is why Roland's GC walkthrough happens on Day 3–5 of the inspection period, not Day 14. Every material finding gets evaluated, quantified, and negotiated while there is still protection on the deposit.
When You Lose Earnest Money — The Real Scenarios
Earnest money forfeiture happens when a buyer defaults on the contract outside of a valid contingency. Common scenarios:
- Walking away after the inspection period without a specific contract out: If you decide you changed your mind after the inspection deadline — no inspection issues, no financing problem, just a change of heart — the seller is typically entitled to keep the earnest money as liquidated damages
- Failing to get financing without a financing contingency: Some buyers or their agents inadvertently agree to waive the financing contingency to make an offer more competitive. If the loan then falls through, the deposit is at risk. Know what contingencies your contract includes before signing
- Missing the closing date without a valid extension: If the contract specifies a closing date and you cannot close on that date — due to lender delay, title issues, or other factors — the seller may declare you in default. Florida contracts have specific extension provisions; use them proactively rather than missing a deadline
- Failing to perform earnest money delivery: Not delivering the deposit within the contract's timeframe (typically 3 business days) is a material default that can void the contract
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Take The Homebuyer Qualification Quiz ›Earnest Money vs. Down Payment — The Confusion Cleared Up
Many first-time buyers confuse these two:
- Earnest money: Paid at contract execution (within 3 days). Held in escrow. Credited toward cash to close at closing. May be refundable depending on contingencies. Amount: 1–3% typically
- Down payment: Paid at closing. Goes to the seller (via the title transaction). Non-refundable once the deal closes. Amount: 3.5% (FHA), 3–20% (conventional), 0% (VA/USDA)
- The relationship: Your earnest money is part of your down payment — it's just paid early. If your down payment is $14,000 (3.5% FHA on a $400K home) and your earnest money is $4,000, you bring $10,000 more at closing ($14,000 - $4,000 already paid = $10,000 remaining)
