You’ve found the perfect home, made an offer—and it’s been accepted. Congratulations! But what happens next?

Two key terms you’ll hear right away are escrow and earnest money. These are essential steps that protect both you and the seller during the homebuying process. Let’s break them down so you know exactly what to expect and why they matter.

What Is Escrow?

Escrow is a neutral third-party account that holds money and documents during a real estate transaction. Once your offer is accepted, the transaction officially enters “escrow.”

Think of it as a secure middle ground. Escrow ensures that:

• Your earnest money is safely held

• The seller completes their agreed-upon terms (like making repairs or clearing title)

• The buyer secures financing, conducts inspections, and finalizes the loan

Nothing is exchanged until all conditions are met—which gives both parties peace of mind.

What Is Earnest Money?

Earnest money is a deposit you put down as a show of good faith when your offer is accepted. It signals to the seller that you’re serious and committed to buying the home.

How much is earnest money?
Typically 1% to 3% of the purchase price, though it can vary depending on local norms or how competitive the market is.

Where does it go?
It’s held in the escrow account—not by the seller—and applied toward your closing costs or down payment when the deal closes.

What Happens to Your Earnest Money?

✅ If the deal closes: Your earnest money is credited toward your purchase.

❌ If the deal falls through:

• You may get it back if you cancel for a reason allowed in your contract (like a failed inspection, low appraisal, or financing issue within your contingency period).

• You may lose it if you back out for a reason not covered by your contingencies or miss key deadlines.

That’s why it’s so important to have a strong contract and a Realtor who keeps track of dates and details—you don’t want to risk losing that money.

How Escrow Protects You

Escrow isn’t just about holding money. It also:

• Ensures title work is clean (no hidden liens or ownership issues)

• Verifies contract terms are followed by both parties

• Coordinates with your lender, appraiser, and closing attorney

• Oversees the release of funds only after everything checks out

It’s like a neutral referee making sure the game is played fairly until you get the keys.

Final Thoughts

Opening escrow and submitting earnest money are major milestones in your journey to homeownership. They kick off the final leg of the process—and having a knowledgeable Realtor by your side makes a big difference in keeping everything on track.

Have questions about the escrow process or how much earnest money to offer?

Let’s chat! I’ll guide you through every step so you feel confident, protected, and fully prepared for what’s next.