Earnest money is typically 1-3% of the purchase price. It's held in an escrow account and credited toward the down payment or closing costs at closing.

If the buyer backs out for a reason allowed by the contract (failed inspection, financing falls through), they get the earnest money back. If they back out for an unprotected reason, the seller may keep it.

In competitive markets, larger earnest money deposits signal serious intent and can strengthen an offer.