What is earnest money?

Earnest money is a good-faith deposit that accompanies your purchase offer. When you make an offer on a home, you typically include an earnest money deposit (usually 1–2% of the purchase price) that signals to the seller that you're a serious buyer.

Who holds it?

Earnest money is held in an escrow account, typically by the title company or the listing agent's brokerage. It doesn't go directly to the seller. It's held neutrally until closing.

What happens to it at closing?

At closing, your earnest money is applied toward your down payment or closing costs. It reduces what you need to bring to the table at closing. It's not an expense on top of everything else.

Can you get it back?

It depends on why you're leaving the deal. If you exit the transaction for a reason covered by a contingency in your contract, such as an unsatisfactory inspection or a failed appraisal, you're typically entitled to your earnest money back. If you walk away without a valid contractual reason, you risk losing it to the seller.

How much is typical?

In North Alabama and Middle Tennessee, earnest money of 1–2% of the purchase price is common, though this varies. Your agent will advise what's appropriate and competitive for your specific offer situation.