The Earnest Money Calculator helps homebuyers, real estate agents, and sellers estimate how much money is needed as a good faith deposit during a property transaction. This amount is usually paid upfront when the buyer signs the purchase agreement to show serious intent to buy the property.
This calculator falls under the Real Estate and Property Finance Calculator category. It supports financial planning during home purchases, investment decisions, and contract negotiations.
Earnest money acts as a deposit that reassures the seller the buyer is committed. The calculator ensures the deposit amount is fair and aligns with industry norms.
formula of Earnest Money Calculator
The basic formula to calculate earnest money is:
Earnest Money = Purchase Price × Earnest Money Percentage
Where:
- Purchase Price = total agreed price of the property or asset
- Earnest Money Percentage = agreed deposit percentage (use decimal form; e.g., 0.02 for 2%)
Buyers and agents usually agree on a deposit between 1% and 3% of the total purchase price. However, in competitive markets or high-value deals, this percentage can be higher.
Quick Reference Table: Estimated Earnest Money Deposits
| Purchase Price | 1% (Low Market) | 2% (Standard Market) | 3% (Competitive Market) |
|---|---|---|---|
| $100,000 | $1,000 | $2,000 | $3,000 |
| $250,000 | $2,500 | $5,000 | $7,500 |
| $500,000 | $5,000 | $10,000 | $15,000 |
| $750,000 | $7,500 | $15,000 | $22,500 |
| $1,000,000 | $10,000 | $20,000 | $30,000 |
This table gives a quick look at standard deposits for different home values. You can adjust percentages based on local market practices.
Example of Earnest Money Calculator
Let’s say you are buying a house priced at $350,000 and you’ve agreed on a 2% earnest money deposit.
Apply the formula:
Earnest Money = 350,000 × 0.02
Earnest Money = $7,000
So, the buyer would need to deposit $7,000 as earnest money when signing the purchase agreement.
This amount is often held in an escrow account and later applied to the down payment or closing costs if the deal is completed.
Most Common FAQs
Typically, it ranges from 1% to 3% of the purchase price. The percentage can vary based on local customs, market conditions, and the seller’s expectations.
Yes, in many cases you can get it back if the contract includes contingencies (like financing or inspection) and those aren’t met. If the buyer backs out without a valid reason, the seller might keep it.
No, but it is very common in real estate. Some sellers may waive it, but offering earnest money strengthens your offer and shows commitment.