Guides · Buying
Earnest money in Washington: how much, where it goes, and when you lose it
Earnest money is your deposit on the house. On most Seattle purchases it goes to the escrow company within a few days of mutual acceptance and counts toward your down payment at closing. You get it back if you cancel properly under a contingency. If you simply walk away and the contract makes the deposit the seller's only remedy, Washington caps what the seller can keep at 5% of the price.
What it is, and what it is not#
Washington law defines it plainly: a payment of part of the purchase price, made to bind you to the agreement, and named in the agreement as earnest money. It is not a fee and it is not extra money. If the sale closes, every dollar of it is credited to you, toward your down payment and closing costs.
What it does is put something at stake. It tells the seller you mean it, and it gives them a remedy if you back out without a reason the contract allows.
Sources
- RCW 64.04.005, earnest money and liquidated damages, Washington State Legislature
How much to put down#
Most Washington offers put down something like 1% to 3% of the price, and competitive ones go higher. There is no statutory amount. It is a term you negotiate like any other.
Here is the part people miss. A bigger deposit costs you nothing if the sale closes, because it is money you were going to spend anyway. What it changes is how much you could lose if you back out without a contractual reason. So the right number depends less on the price of the house than on how sure you are about everything that could go wrong between offer and closing: the inspection, the appraisal, your loan, the sale of your current home.
It also has to be real money on the day it is due. If your deposit is coming from selling stock, a retirement account or a gift, start moving it before you write the offer, not after.
Have an address in mind already?
Book a call and I'll tell you what I'd doWhen it is due, and how the days are counted#
Your purchase agreement sets the deadline, usually a few days after mutual acceptance. Mutual acceptance is the moment the fully signed agreement is delivered back to the other side, not the moment the last person signs it.
The standard Washington purchase agreement counts days in a specific way, and it applies to every deadline in the deal, not just this one. Day one is the day after the event that starts the clock. A period of five days or less skips weekends and legal holidays. A longer period counts them. Every period ends at 9 p.m. on its last day, and if that day falls on a weekend or a legal holiday, the deadline moves to the next business day.
So a three-day deadline that starts on a Friday ends on Wednesday night, not Monday. Put every deadline in your calendar the day you go mutual.
Who holds it, and how to get it there safely#
The contract names who holds the deposit. On most Seattle purchases it is the escrow company, which keeps it in a trust account until closing. Escrow usually opens the business day after mutual acceptance and will tell you how it accepts funds: a cashier's check delivered in person, a wire, or sometimes an upload through its own app.
Never send money on the strength of an email. Real estate wire fraud works by sending you convincing instructions at exactly the moment you are expecting them. I will never email you wiring instructions. When escrow sends them through its secure system, call escrow on a number you looked up yourself and confirm the account details out loud before you send a cent.
When you get it back#
You get the deposit back when you end the deal the way the contract, or the law, lets you. The common exits are the contingencies you wrote into the offer: the inspection, your financing, the appraisal, the sale of your current home. Each has a deadline, and the protection lasts only as long as the deadline does. Give proper notice in time and the money comes back to you. Miss it, and that contingency is gone.
Two more exits come from statute rather than the contract. When you receive the seller's disclosure statement, Form 17, you have three business days, unless your contract sets a different period, to approve it or rescind the agreement and get your deposit back. When you buy a condo, you can cancel within five business days of first receiving the association's resale certificate.
Sources
- RCW 64.06.030, delivery of the disclosure statement and the buyer's right to rescind, Washington State Legislature
- RCW 64.90.640, condominium resale certificates, Washington State Legislature
When you can lose it, and the 5% limit#
If you fail to complete the purchase without a legal excuse, the seller can keep the deposit. Washington puts a ceiling on that. When a contract makes forfeiting the earnest money the seller's sole and exclusive remedy, the provision is enforceable even if the seller lost nothing, but the amount forfeited may not exceed 5% of the purchase price.
On an $800,000 house, that is $40,000 at most. It is also why a deposit above 5% does not put more than 5% at risk under that kind of clause.
If a contract does not make the deposit the seller's only remedy, the seller may be able to pursue other remedies instead. That is a conversation for an attorney, and it is a good reason to read the default section of your agreement before you sign rather than after.
Non-refundable earnest money#
In a competitive situation, some offers make part of the deposit non-refundable after a milestone, most often once the inspection contingency is satisfied. At that point the agreed amount is released to the seller, stops being earnest money and becomes a payment toward the price. If the deal later fails for any reason other than the seller's default, the seller keeps it.
It is a real lever, because it tells a seller that the part of the deal most likely to fall apart is behind you. It is also real money you can lose. I would only use it once the inspection is done and your loan approval is solid, and only with an amount you could stand to lose.
If there is a dispute#
When a deal fails and both sides claim the deposit, whoever holds it cannot simply choose. Washington sets out the process. After a written demand for the money, the holder has 15 days to notify the other side, release the funds or start a court action. The other side then has 20 days to object in writing. If nobody objects, the holder releases the money within 10 days after that. If someone does, the holder must file an interpleader action within 60 days and let a court decide.
The court must award the holder its reasonable attorney fees and costs in that case. Between that and the delay, most earnest money disputes settle.
Sources
- RCW 64.04.220, handling of earnest money, Washington State Legislature
Common questions#
How much earnest money is normal in Seattle?
Something like 1% to 3% of the price is common, and competitive offers go higher. There is no required amount. It is credited to you at closing, so a larger deposit only costs you anything if you back out without a contractual reason.
Is earnest money refundable in Washington?
Yes, if you end the deal under a contingency or a statutory right, such as the three business days after you receive Form 17, and you give notice before the deadline. If you back out without a legal excuse, the seller can keep it.
When is earnest money due?
When your purchase agreement says, usually a few days after mutual acceptance. Periods of five days or less skip weekends and legal holidays, and deadlines end at 9 p.m. on the last day.
Who holds the earnest money?
Whoever the contract names. On most Seattle purchases that is the escrow company, which keeps it in a trust account until closing.
What happens to earnest money at closing?
It is credited to you, toward your down payment and closing costs. It is part of the price, not an extra cost.
Can a seller keep more than 5% of the price?
Not under a clause that makes the deposit the seller's sole remedy. Washington caps that forfeiture at 5% of the purchase price. Whether a seller could pursue other remedies under a different clause is a question for an attorney.
What is non-refundable earnest money?
A term some competitive offers use: after a milestone, usually the inspection, part of the deposit is released to the seller and becomes theirs if the deal fails for any reason other than the seller's default. Use it only with money you could afford to lose.
