Earnest Money and Terms: How to Structure a Strong Offer in Seattle

Master earnest money and contract terms: understand amounts, wire safety, when you get it back, and how to balance protection with competitiveness in Seattle's market.

Tags:earnest-money, contract-terms, offer-strategy, seattle, washington
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You're ready to make an offer. Price is important, but it's not everything. Two offers at the same price can be very different. One has $5,000 earnest money and 30-day financing contingency. The other has $25,000 earnest money and 10-day financing contingency. Which wins?

Earnest money and contract terms show sellers you're serious and capable. In Seattle's competitive market, strong terms can beat a higher price. Understanding how to structure your offer gives you an advantage.

In this article, you'll learn what earnest money is and how much to offer, where it's held and how it's protected, how to wire funds safely (avoiding fraud), when you get earnest money back vs when you lose it, key contract terms that matter to sellers, how to balance protection with competitiveness, and see real Seattle offer examples.

Table of Contents

Earnest Money Explained

What It Is

Definition: Deposit showing you're serious about buying

Also called:

  • Good faith deposit
  • Earnest deposit
  • EMD (earnest money deposit)

Purpose:

  • Shows commitment to seller
  • Compensates seller if you back out without valid reason
  • Applied to down payment at closing

Not the same as:

  • Down payment (comes later)
  • Inspection fee (separate)
  • Appraisal fee (separate)

How Much to Offer

Seattle typical range: 1-3% of purchase price

Examples:

  • $800,000 home: $8,000-$24,000
  • $1,000,000 home: $10,000-$30,000
  • $1,500,000 home: $15,000-$45,000

Factors affecting amount:

Market conditions:

  • Hot market (multiple offers): 3% or more
  • Normal market: 1-2%
  • Slow market: 1%

Purchase price:

  • Higher price = higher dollar amount
  • But percentage may be lower
  • $2M home might be 1.5% ($30,000)

Competition:

  • Multiple offers expected: increase earnest money
  • Shows you're serious
  • Differentiates your offer

Your financial situation:

  • More cash available: offer more
  • Limited cash: offer minimum
  • Balance with down payment needs

Seller expectations:

  • Some sellers request specific amount
  • Listing may state "minimum $X earnest money"
  • Match or exceed to be competitive

Seattle Market Examples

Competitive offer (hot market):

  • Purchase price: $950,000
  • Earnest money: $30,000 (3.2%)
  • Shows: strong commitment, serious buyer

Standard offer (normal market):

  • Purchase price: $850,000
  • Earnest money: $15,000 (1.8%)
  • Shows: reasonable commitment

Minimum offer (slow market):

  • Purchase price: $750,000
  • Earnest money: $7,500 (1%)
  • Shows: basic commitment

Where Earnest Money Is Held

Escrow Company

What is escrow:

  • Neutral third party
  • Holds money and documents
  • Releases per contract terms
  • Protects both parties

Common Seattle escrow companies:

  • Chicago Title
  • Fidelity National Title
  • First American Title
  • Old Republic Title
  • Local independent companies

How it works:

  1. You wire earnest money to escrow
  2. Escrow holds in trust account
  3. Escrow releases per contract:
    • To seller if you default
    • Back to you if you cancel with valid contingency
    • Applied to down payment at closing

Protection:

  • Escrow companies are licensed and bonded
  • Funds held in trust account (separate from company funds)
  • Washington State regulations protect buyers

Earnest Money Timeline

Day 1-3: After offer accepted

  • Wire earnest money to escrow
  • Escrow confirms receipt
  • Contract is fully executed

During contract period:

  • Earnest money held in escrow
  • Earns minimal interest (yours)
  • Cannot be released without agreement or contract terms

At closing:

  • Applied to your down payment
  • Reduces cash needed at closing
  • Shows on closing disclosure

If deal falls through:

  • Released per contract terms
  • With valid contingency: back to you
  • Without valid reason: to seller

Wire Transfer Safety

Wire Fraud Is Real

Common scam:

  • Hacker intercepts email
  • Sends fake wire instructions
  • Looks legitimate (uses real names, logos)
  • Money goes to criminal, not escrow

Seattle area incidents:

  • Multiple buyers lose $10,000-$50,000
  • FBI reports increasing fraud
  • Very difficult to recover funds

How to Protect Yourself

Never trust email wire instructions:

  • Email can be hacked
  • Criminals are sophisticated
  • Even if email looks real

Always verify by phone:

  1. Get wire instructions by email
  2. Call escrow company directly (use number from business card or website, NOT from email)
  3. Verify: account number, routing number, recipient name
  4. Confirm with person you've met in person if possible

Red flags:

  • Urgent request to wire immediately
  • Email from slightly different address (escrow@company.com vs escrow@compnay.com)
  • Request to wire to personal account
  • Pressure to wire without verification

Best practices:

  • Save escrow company contact info when you first meet
  • Call from saved number, not email link
  • Verify every detail
  • Wire during business hours (easier to verify)
  • Confirm receipt immediately after wiring

If you're scammed:

  • Contact your bank immediately
  • File FBI IC3 report: ic3.gov
  • Contact escrow company
  • Contact your agent
  • Time is critical (act within hours)

Wire Transfer Process

Step 1: Receive instructions

  • Escrow sends wire instructions
  • Usually by email
  • Includes: bank name, account number, routing number, reference info

Step 2: Verify by phone

  • Call escrow company
  • Use number from business card or website
  • Read back all details
  • Confirm correct

Step 3: Initiate wire at your bank

  • In person or online
  • Provide wire instructions
  • Include reference info (your name, property address)
  • Pay wire fee ($15-$30 typical)

Step 4: Confirm receipt

  • Call escrow within 2 hours
  • Verify they received funds
  • Get confirmation in writing
  • Keep records

When You Get Earnest Money Back

Valid Contingencies

Inspection contingency:

  • Find major issues during inspection
  • Seller won't repair or credit
  • You cancel within contingency period
  • Get earnest money back

Financing contingency:

  • Can't get loan approved
  • Despite good faith effort
  • Cancel within contingency period
  • Get earnest money back

Appraisal contingency:

  • Appraisal comes in low
  • Seller won't reduce price
  • You can't cover gap
  • Get earnest money back

Title contingency:

  • Title issues discovered
  • Seller can't clear title
  • You cancel
  • Get earnest money back

HOA review contingency:

  • HOA documents reveal problems
  • You cancel within review period
  • Get earnest money back

Home sale contingency:

  • Your current home doesn't sell
  • Within specified timeframe
  • You cancel
  • Get earnest money back

Contingency Deadlines

Must cancel within deadline:

  • Inspection: typically 10 days
  • Financing: typically 17 days
  • Appraisal: typically 17 days
  • HOA review: typically 5-10 days

After deadline passes:

  • Contingency is removed
  • Can't use that reason to cancel
  • Risk losing earnest money

Example:

  • Inspection contingency: 10 days
  • You find issues on day 8
  • Seller won't repair
  • Cancel on day 9: get earnest money back ✅
  • Cancel on day 12: lose earnest money ❌

When You Lose Earnest Money

Forfeiture Scenarios

1. Cancel without valid contingency:

  • All contingencies removed
  • You change your mind
  • Seller keeps earnest money

2. Miss contingency deadline:

  • Don't cancel within timeframe
  • Contingency expires
  • Can't use that reason anymore

3. Fail to perform:

  • Don't provide required documents
  • Don't apply for financing
  • Don't show good faith effort
  • Seller can cancel and keep earnest money

4. Financing falls through (your fault):

  • Quit your job during contract
  • Make large purchases (hurt credit)
  • Don't provide documents to lender
  • Seller keeps earnest money

5. Cold feet:

  • Just don't want house anymore
  • No valid contingency
  • Seller keeps earnest money

Disputes

If disagreement about earnest money:

  • Escrow holds until resolved
  • Both parties must agree to release
  • Or court order required
  • Or arbitration per contract

Common disputes:

  • Buyer claims valid contingency
  • Seller claims buyer defaulted
  • Escrow can't decide
  • May require legal action

How to avoid disputes:

  • Cancel in writing within deadlines
  • Cite specific contingency
  • Provide documentation (inspection report, loan denial)
  • Follow contract procedures exactly

Key Contract Terms

Beyond Price and Earnest Money

Closing date:

  • When you take ownership
  • Typical: 30-45 days
  • Flexible closing can be attractive to seller

Contingency periods:

  • Shorter = more attractive to seller
  • But less time for you to investigate
  • Balance protection with competitiveness

Possession date:

  • When seller moves out
  • Usually same as closing
  • Rent-back option (seller stays after closing)

Included items:

  • Appliances, fixtures, window coverings
  • Specify in contract
  • Avoid disputes

Escalation clause:

  • Automatically increase offer if competing offers
  • See our Escalation Clause article

Appraisal gap coverage:

  • Agree to cover gap between appraisal and price
  • Up to specified amount
  • Makes offer stronger but costs cash

Competitive Terms in Seattle

Strong offer terms:

  • 3%+ earnest money
  • 10-day inspection (vs 15-day)
  • 17-day financing (vs 21-day)
  • Flexible closing date
  • Appraisal gap coverage
  • Pre-inspection (waive inspection contingency)

Balanced offer terms:

  • 2% earnest money
  • 10-day inspection
  • 17-day financing
  • Standard closing (30-45 days)
  • Appraisal contingency included

Buyer-friendly terms:

  • 1% earnest money
  • 15-day inspection
  • 21-day financing
  • Extended closing (60 days)
  • All contingencies included
  • Home sale contingency

What Sellers Care About

Priority order (typical):

  1. Price (most important)
  2. Certainty (will deal close?)
  3. Timeline (when can they move?)
  4. Convenience (easy transaction?)

How terms affect certainty:

  • Higher earnest money = more committed
  • Shorter contingencies = less time to back out
  • Pre-approval from strong lender = more likely to close
  • Proof of funds = can cover down payment
  • Appraisal gap coverage = deal won't fall apart

How to show certainty:

  • Large earnest money deposit
  • Pre-approval letter from reputable lender
  • Proof of funds for down payment
  • Short contingency periods
  • Offer to cover appraisal gap

Real Seattle Offer Examples

Example 1: Competitive Hot Market Offer

Property: Ballard house, list price $900,000, multiple offers expected

Offer terms:

  • Price: $975,000
  • Earnest money: $30,000 (3.1%)
  • Inspection: 10 days
  • Financing: 17 days
  • Appraisal gap: Will cover up to $25,000
  • Closing: Flexible (seller's choice)
  • Pre-approval: From local lender, strong financials

Why it's strong:

  • Above asking price
  • High earnest money (shows commitment)
  • Short contingencies
  • Appraisal gap coverage (reduces risk)
  • Flexible closing (convenient for seller)

Result: Offer accepted, closed successfully

Example 2: Balanced Normal Market Offer

Property: Fremont townhome, list price $750,000, normal market

Offer terms:

  • Price: $750,000
  • Earnest money: $15,000 (2%)
  • Inspection: 10 days
  • Financing: 17 days
  • Appraisal: Contingent (no gap coverage)
  • Closing: 35 days
  • Pre-approval: From national lender

Why it's balanced:

  • At asking price (fair market value)
  • Standard earnest money
  • Standard contingencies
  • Protected with appraisal contingency
  • Reasonable closing timeline

Result: Offer accepted after minor negotiation on closing date

Example 3: Buyer-Friendly Slow Market Offer

Property: Renton house, list price $650,000, 45 days on market

Offer terms:

  • Price: $625,000
  • Earnest money: $6,500 (1%)
  • Inspection: 15 days
  • Financing: 21 days
  • Appraisal: Contingent
  • Closing: 60 days (need to sell current home)
  • Home sale contingency: Included

Why it's buyer-friendly:

  • Below asking price
  • Minimum earnest money
  • Extended contingencies
  • Home sale contingency (risky for seller)
  • Long closing

Result: Seller countered at $640,000, buyer accepted

Balancing Protection and Competitiveness

Your Risk Tolerance

Risk-averse buyer:

  • Keep all contingencies
  • Longer contingency periods
  • Lower earnest money
  • Accept you may not win in competition

Balanced buyer:

  • Standard contingencies
  • Standard periods (10-day inspection, 17-day financing)
  • 2% earnest money
  • Competitive in normal market

Aggressive buyer:

  • Short contingencies or waive some
  • High earnest money (3%+)
  • Appraisal gap coverage
  • Pre-inspection
  • Wins in competitive situations

When to Be Aggressive

Hot market:

  • Multiple offers expected
  • Need strong terms to compete
  • Risk: less protection

Dream home:

  • Perfect for your needs
  • Don't want to lose it
  • Worth taking more risk

Strong financial position:

  • Large cash reserves
  • Can cover appraisal gap
  • Can afford to lose earnest money if necessary

When to Stay Protected

Uncertain about home:

  • Not sure it's right fit
  • Want time to investigate
  • Keep contingencies

Tight budget:

  • Can't afford surprises
  • Need appraisal to come in
  • Can't cover gap

First-time buyer:

  • Learning process
  • Want protection
  • Accept may not win every offer

Summary

Key takeaways:

  • Earnest money typical: 1-3% of purchase price ($10,000-$30,000 in Seattle)
  • Held in escrow by neutral third party (title company)
  • Wire transfer safety: ALWAYS verify by phone before wiring
  • Get earnest money back if cancel with valid contingency within deadline
  • Lose earnest money if cancel without valid reason or miss deadline
  • Strong terms: high earnest money, short contingencies, appraisal gap coverage
  • Balance protection with competitiveness based on market and your situation
  • Sellers care about: price, certainty, timeline, convenience

Next steps:

  1. Determine your earnest money budget - how much cash can you commit?
  2. Assess your risk tolerance - how much protection do you need?
  3. Discuss with your agent - what terms are competitive in current market?
  4. Get pre-approved - strong pre-approval letter is essential
  5. Gather proof of funds - bank statements showing down payment + earnest money
  6. Save escrow company contact info - for safe wire transfer verification

This article provides general information about earnest money and contract terms and should not be considered legal advice. Consult with your real estate agent and attorney for guidance specific to your situation.

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