How Much Earnest Money Should I Offer?

This is a really common question I'm asked - "How much earnest money should we include with our offer?". Since I hear this often, I figured it'd be a great subject for a blog post!

Like (essentially) everything in the Purchase Agreement, the amount of earnest money is negotiable!  However, REALTORs frequently use a rule of thumb for earnest money - roughly 1% of the purchase price.  For example, if the home you are offering on is priced at $280,000, I normally instruct my clients that something in the $2,500 - $3,000 range is an acceptable amount of earnest money.

There are some important caveats to this rule of thumb, however.  For example, when offering on a foreclosed home the seller may require a certain amount.  I've seen foreclosures require 2% of the purchase price for earnest money - in the $280,000 example above, the bank would require $5,600 for earnest money.

Another caveat is that in a multiple offer situation, raising the earnest money might make your offer look stronger than the other competing offers.  Of course sellers ultimately care the most about the sales price over the rest of the details, but it's a simple way to increase the strength of an offer!