What's a Good Faith Deposit (Earnest Money) in California?

A good faith deposit, also called earnest money, is the amount you put down to show you're serious about a purchase once your offer is accepted. In California, it's typically 1-3% of the purchase price and gets held in escrow, then applied toward your down payment and closing costs at close.

It's refundable if you cancel within your contract's contingency periods, which is something I make sure every buyer understands before they write an offer.

How It Works

Once your offer is accepted, you'll typically have three business days to deposit your earnest money into an escrow account. It's held by a neutral third party, the escrow company, not by the seller or the agent. If the deal closes, that money gets credited toward what you owe at closing. If you cancel for a reason covered by your contingencies, inspection, appraisal, or loan, you get it back.

Where it gets risky is if you cancel outside your contingency periods, or waive a contingency and then back out. That's when a seller can potentially keep your deposit. Knowing your deadlines is what protects you here.

Ready to Make an Offer?

Every offer I write walks you through exactly what your deposit covers and when it's protected. If you're getting ready to buy in Downey or nearby, let's talk through it before you write your first offer.