How much earnest money is typical in Greater Seattle?

Earnest money in Greater Seattle is typically 1–3% of the purchase price, though amounts can be higher in competitive offers. On a $900,000 home, this is roughly $9,000–$27,000. Higher earnest money signals buyer seriousness to the seller and can strengthen an offer, particularly when competing against others at similar price points.

When can a buyer lose their earnest money in Washington state?

Earnest money is at risk if a buyer cancels the transaction for a reason not covered by a contingency in the purchase agreement. If you have an inspection contingency and cancel within the contingency window for an inspection-related reason, you typically receive your earnest money back. If you've waived contingencies and then back out, you generally forfeit the earnest money to the seller.

Where is earnest money held in Washington state real estate?

In Washington, earnest money is held in escrow by a licensed title or escrow company — not by the real estate brokerage. It is applied toward your down payment or closing costs at closing. If a deal falls through, whether the buyer receives it back or the seller retains it depends on the terms of the purchase and sale agreement and which party was at fault.

What happens to earnest money in a disputed deal in Washington?

When both parties disagree on earnest money release, the title company holding it requires written consent from both buyer and seller before releasing funds. Neither party can unilaterally direct the release. In contested situations, the dispute may ultimately require mediation or legal resolution. This is why understanding your contingency rights before the deadlines expire is critical.

Earnest Money in Washington State: What Buyers Should Understand Before Making an Offer

Short answer

Earnest money is a deposit that signals a buyer's seriousness at the time of an offer. In Washington, what happens to that money if the transaction does not close depends almost entirely on whether the buyer had a valid contractual basis to exit — a contingency, or what the law calls a "legal excuse." Buyers who understand this connection before they write an offer are better positioned to know when their earnest money is protected and when it is genuinely at risk.

What earnest money is

Earnest money is a deposit paid by the buyer shortly after mutual acceptance of a purchase and sale agreement. It is held in escrow — by a licensed title company, escrow company, real estate broker, or attorney — and applied toward the buyer's down payment or closing costs at closing. If the transaction does not close, who keeps it depends on the circumstances.

Washington law requires that earnest money deposits be held in a designated escrow or trust account by a licensed entity, separate from operating funds. Buyers should confirm that their earnest money is being held by a licensed holder in accordance with this requirement.

The legal framework: RCW 64.04.005

RCW 64.04.005 addresses what happens when a buyer fails to complete a purchase. The statute validates liquidated damages provisions and earnest money forfeiture clauses in Washington purchase and sale agreements — meaning a seller can legally keep the earnest money if a buyer fails to complete the purchase without a legal excuse, provided the agreement includes this provision.

One specific limit in the statute: if the forfeiture amount is five percent or less of the purchase price, the liquidated damages provision can be written as the seller's "sole and exclusive remedy" for the buyer's default. This means the seller's recourse is limited to the earnest money — the seller cannot additionally sue for breach of contract damages beyond that amount. For forfeiture provisions above five percent of the purchase price, the exclusive remedy limitation may not apply.

Most standard residential purchase and sale agreements in Washington — including the forms commonly used in Greater Seattle — include earnest money forfeiture provisions. Buyers should ask their agent to confirm what their specific agreement says about earnest money forfeiture and whether it follows the RCW 64.04.005 framework.

Contingencies are how buyers protect earnest money

A contingency is a contractual condition that must be satisfied — or formally waived — for the transaction to proceed. If the condition is not met and the buyer exercises their right under the contingency to terminate, that termination typically constitutes a "legal excuse" under the contract, and the earnest money is returned to the buyer.

The most common contingencies in a Greater Seattle purchase and sale agreement:

Inspection contingency. Gives the buyer a defined number of days to conduct inspections and, if the buyer is not satisfied with the physical condition of the property, to terminate and receive the earnest money back. In Greater Seattle's competitive market, some buyers waive this contingency — understanding that doing so means the earnest money is at risk if a physical condition discovered after the fact motivates them to exit.

Financing contingency. Gives the buyer a defined period to obtain a financing commitment. If the buyer cannot obtain financing on the terms specified in the contract, they can terminate and recover earnest money. Buyers who waive a financing contingency are accepting the risk that if their loan does not come through, they may not have a contractual basis to exit with their earnest money protected.

Appraisal contingency. If the property appraises below the purchase price, an appraisal contingency gives the buyer options — to terminate, renegotiate, or proceed. Without this contingency, the buyer who has agreed to pay a price above appraised value has less contractual protection if they decide the gap is too large to close.

Title and document review contingencies. Standard agreements include periods to review title and, for condominiums and common interest communities, HOA documents (resale certificates). Buyers who do not complete their review within these periods may waive their review rights.

The timing risk. Contingency periods have specific deadlines in the contract. If a buyer fails to act within the contingency window — either to satisfy it or formally terminate — they may inadvertently waive the contingency and put their earnest money in a different position. Review your specific contract dates with your agent before signing and track them carefully.

When a buyer exits without a valid contingency

A buyer who decides they no longer want the property after all contingencies have been removed — or who never included meaningful contingencies — is exiting without a legal excuse under Washington law. In this scenario, the seller has a contractual basis to claim the earnest money as liquidated damages under RCW 64.04.005.

This is the earnest money risk that buyers who waive contingencies accept. Waiving inspection and financing contingencies may strengthen an offer in a competitive situation — but those contingencies are the primary mechanism that protects earnest money if the buyer later needs to exit.

What happens when there is a dispute: RCW 64.04.220

Not all earnest money situations are clear-cut. When both sides disagree about who is entitled to the deposit, RCW 64.04.220 governs the procedure:

A party who believes they are entitled to the earnest money makes a written demand on the holder (typically the escrow company or title company).
The holder must, within 15 days of receiving the demand, notify all other parties in writing of the demand.
The other parties have 20 days from the holder's notice to object in writing. If no written objection is received within 20 days, the holder releases the earnest money to the demanding party.
If a written objection is received, the holder must not release the funds to either party and must commence an interpleader action within 60 days — unless the parties provide consistent instructions about how to proceed.

Interpleader is a legal action where the holder deposits the disputed funds with the court and lets the parties litigate the outcome. Buyers facing an earnest money dispute should consult a real estate attorney.

What amount is typical in Greater Seattle

Washington law does not specify a required earnest money amount — it is a negotiated term in the offer. The amount offered is a signal of seriousness and is part of the offer's overall package.

Amounts vary by transaction, price point, and market conditions. Buyers should ask their agent what amounts are typical for the property type and price range they are pursuing, and confirm that they are comfortable having that amount held in escrow for the duration of the transaction. Do not offer an earnest money amount that represents a financial hardship to lose — because there are scenarios, particularly after contingency removal, where losing it is legally possible.