One of the first steps in the home-buying process after you get an offer accepted is delivering your earnest money to the seller’s brokerage (or an agreed-upon third party). This deposit is a show of good faith and commitment to the deal. At closing, this deposit goes towards your closing costs or down payment. The amount of earnest money is negotiated at the time of writing an offer but is typically around 1% of the purchase price. So, if the purchase price in the contract is $350,000, expect to put down at least $3,500 for your earnest money deposit.
It is extremely rare for a buyer to lose their earnest money deposit if they back out of a deal because there are many legitimate exit ramps in the contract that allow you to walk away and receive your full deposit back. I have personally never had a client lose their earnest money when backing out of a deal, largely due to the expert advice from myself and my preferred attorney, who meticulously ensures that contingency dates do not lapse. However, I have heard nightmare stories from other Realtors about contingency dates lapsing or buyers backing out due to cold feet after all the legitimate exit ramps have closed, resulting in them losing their earnest money deposit.
Though this can seem unfair, it is also a measure of protection for the seller. Once a home goes under contract (CTG) and then is reactivated after the buyer backs out for any reason, the property often carries a stigma. Buyers see reactivated homes and frequently assume (many times incorrectly) that there must be something major wrong with the house. While this is sometimes the case, it often results from first-time buyers getting cold feet or overreacting to minor issues. All that said, reactivated homes tend to attract less interest, resulting in a lower purchase price. The seller also loses time on the market and can incur an additional month or more of mortgage payments. The earnest money from the previous buyer helps provide a buffer in the event this happens.