Earnest money is the deposit a buyer puts down after an offer is accepted to show they’re serious. In Washington, it’s usually held by the closing agent or the buyer’s brokerage, and it’s applied to the buyer’s down payment and costs at closing. A buyer can lose it by backing out without a valid contract reason, such as after a contingency deadline has passed. Under Washington law, when the purchase agreement makes forfeiture of earnest money the seller’s sole remedy, that amount is generally enforceable only up to 5% of the purchase price.
Whether you’re buying or selling in Pierce County, understanding how earnest money works helps you write stronger offers and avoid expensive mistakes.
How earnest money works in a Washington sale
- The offer states the amount and who will hold it, usually the closing agent (escrow) or the buyer’s brokerage trust account.
- The buyer delivers it after mutual acceptance. The standard NWMLS purchase agreement sets a short default deadline, commonly two days after mutual acceptance, unless the parties agree otherwise. See what happens at mutual acceptance.
- It sits in trust or escrow during the transaction.
- At closing, it’s credited toward the buyer’s down payment and closing costs.
How much earnest money is typical?
There’s no set amount in Washington. Buyers and their agents consider the price, how competitive the situation is, and how confident the buyer is in closing. A larger deposit can make an offer look stronger, but it also puts more at risk if the buyer defaults.
| Purchase price | 1% | 2% | 3% |
|---|---|---|---|
| $500,000 | $5,000 | $10,000 | $15,000 |
| $750,000 | $7,500 | $15,000 | $22,500 |
| $1,000,000 | $10,000 | $20,000 | $30,000 |
Illustration of percentages only, not a recommendation.
When buyers typically get it back
If a buyer terminates properly under a contingency in the contract, and within its deadline, the earnest money is typically returned. Common protections include:
- Inspection contingency. See home inspection contingencies in Washington.
- Financing and appraisal contingency. See what happens if a home appraises low.
- Sale-of-buyer’s-home contingency. See contingent offers in Washington.
- Review periods for documents like title reports or, for condos and HOAs, the resale certificate.
Writing an offer soon?
Josh can help you choose an earnest money amount and contingency terms that make your offer strong without taking on more risk than you should. Start with The Barnard Group.
When buyers can lose it
- Backing out after contingencies have expired or been waived
- Missing a contract deadline and losing the protection it provided
- Waiving financing or appraisal protections, then being unable to close
- Failing to perform under the contract without a valid reason
Waiving contingencies can make an offer more attractive, but it also means more of the earnest money is at risk. Our guide to the escalation addendum covers other ways buyers compete.
The 5% rule
Washington’s RCW 64.04.005 allows a purchase agreement to make forfeiture of the earnest money the seller’s sole and exclusive remedy if the buyer defaults, and it enforces that provision when the amount doesn’t exceed 5% of the purchase price. Amounts above 5% are evaluated under other legal standards. The NWMLS purchase agreement includes an option for this approach. Ask your agent to explain which option your agreement uses, and consult an attorney with legal questions.
What happens in a dispute?
If buyer and seller disagree about who gets the earnest money, the holder generally won’t release it without both parties’ agreement or a legal resolution. Clear deadlines, written notices, and following the contract carefully prevent most disputes.
What sellers should look for
- A meaningful deposit relative to price
- Delivery on time, confirmed by the holder
- Contingency deadlines that fit your plans
- A strong pre-approval that makes default less likely
Frequently asked questions
Is earnest money the same as a down payment?
No, but it’s credited toward your down payment and closing costs at closing.
Who holds earnest money in Washington?
Usually the closing agent or the buyer’s brokerage, as named in the purchase agreement.
Can a seller keep more than 5%?
The statute’s protection applies to amounts up to 5% when forfeiture is the seller’s sole remedy. Anything beyond that is handled under other legal rules. Talk to an attorney about specifics.
Make your offer with confidence
A well-written offer protects your deposit and still competes. Book a complimentary strategy session with Josh Barnard and The Barnard Group before your next offer or listing.
This article is general information and not legal advice. NWMLS forms are revised periodically; review current forms with your agent and consult an attorney for legal questions.
