Earnest Money in Maryland: How Much to Put Down, Who Holds It, and When You Get It Back

When you make an offer on a house in Maryland, you don't just sign the contract — you also put up money. That money is called earnest money (sometimes "EMD" or earnest money deposit), and it's the single most-asked-about line in the contract every time I write one with a first-time buyer.

The questions are always the same. How much? Where does it go? When do I get it back? And — the one that scares people — when can I lose it?

After ~100 closed deals across Montgomery County, DC, and Northern Virginia, here's the actual answer.

What is earnest money, exactly?

Earnest money is a deposit you write at the moment of signing the contract, meant to show the seller you're serious. The word "earnest" literally means showing seriousness of intent. Without it, your offer is essentially a non-binding promise. With it, you've put cash at risk — which is what gives the seller confidence to take the home off the market for you.

It is not the down payment. The down payment is the cash you bring to closing to reduce your loan amount. Earnest money is a smaller deposit that comes out of your pocket immediately — usually within 1–3 business days of contract acceptance — and gets credited toward your closing costs and down payment when the deal actually closes.

In Maryland, the earnest money is almost always held by either the title company that will be doing your settlement, or the listing brokerage's escrow account. It is never held by the seller directly. That's important — it means the money is in a neutral third-party account, governed by the contract terms, not at the seller's mercy.

How much earnest money do I need in Maryland?

The standard range in Montgomery County and the DC metro is 1% to 3% of the purchase price. That's the cultural norm — not a legal requirement.

What that looks like at common price points:

• $400,000 home: $4,000 (1%) to $12,000 (3%)
• $600,000 home: $6,000 (1%) to $18,000 (3%)
• $800,000 home: $8,000 (1%) to $24,000 (3%)
• $1,200,000 home: $12,000 (1%) to $36,000 (3%)

Most of the offers I write fall right around 2% — enough to look serious without locking up cash you might need elsewhere. The 3% number gets used as a competitive lever in multiple-offer situations. When five buyers are offering the same price, the one putting up 3% earnest money looks meaningfully more committed than the one putting up 1%.

In rare cases I'll see 5% or higher, usually on luxury homes in Potomac or Bethesda where buyers want to signal seriousness on a $2M+ purchase. But that's the exception.

Who holds my earnest money in Maryland?

Two options, both governed by Maryland Real Estate Commission rules:

1. The title company / settlement attorney. This is increasingly common because the title company will be doing your settlement anyway. They hold the funds in escrow, and the money is already in their hands when it's time to apply it to your closing costs. Cleaner.

2. The listing brokerage's escrow account. Each licensed real estate brokerage in Maryland is required to maintain a non-interest-bearing escrow account. The listing agent's brokerage holds the funds there until closing or release.

Either is fine. What matters is that it's not in the seller's bank account and not with your buyer's agent personally. If anyone ever asks you to wire earnest money to a personal account, stop and call me — that's a wire fraud scam pattern and it happens regularly in this market.

How do I actually pay the earnest money?

In Maryland, three accepted methods:

1. Personal check — most common. Made out to the holder (title company or listing brokerage), delivered within 1–3 business days of contract acceptance. The contract specifies the deadline.
2. Wire transfer — increasingly common, especially for larger amounts. Always call the title company directly at a number you've independently verified to confirm wire instructions. Never trust wire instructions emailed to you. Wire fraud is the single biggest loss point in real estate transactions.
3. Cashier's check / certified funds — sometimes required for very competitive offers or when the seller wants extra certainty.

A check that bounces is a contract breach. Don't write the check unless the funds are sitting in the account ready to clear.

When do I get my earnest money back?

You get it back at three points:

1. When you close. This is the happy path. The earnest money is credited against your closing costs and down payment on the settlement statement. You'll see it as a line item — "deposit retained by [holder]" — that reduces the amount of cash you need to bring to closing.

2. When you exercise a contingency. If your contract has a financing contingency and your loan is denied, you get the earnest money back. Same for inspection (if you exercise the right to walk based on inspection findings, within the time frame), appraisal (if the home appraises low and you can't reach an agreement with the seller), or any other contingency the contract gives you.

3. When the seller breaches. Rare but it happens — seller fails to deliver clear title, seller refuses to make agreed-upon repairs, seller backs out without legal cause. You get the earnest money back, and depending on the contract you may have additional remedies.

In all three cases, the holder of the earnest money requires a release form signed by both parties. If the seller refuses to sign, the money is held until the dispute is resolved.

When do I lose my earnest money?

This is the part that scares buyers, and the answer is: only if you breach the contract in a way that isn't protected by a contingency.

The four most common ways buyers lose earnest money:

1. Waiving a contingency and then failing on it. If you waive the financing contingency and then your loan gets denied at the last minute, the seller can retain your earnest money. This is why I almost never advise waiving the financing contingency unless you're paying cash. See contingencies in Maryland for the full breakdown of which to keep and which to release.

2. Missing a contractual deadline. If your inspection contingency expires and you haven't released or exercised it, you've defaulted on the protection it gave you. Calendar every deadline in your contract on day one.

3. Walking away without legal cause. Cold feet are not a contingency. If you decide three days before closing that you've changed your mind, the seller is within their rights to keep the earnest money.

4. Failing to deliver the earnest money on time. If the contract says EMD due within 3 business days and you deliver it on day 5, the seller can void the contract — and in some cases retain the deposit if the check clears late.

The takeaway: as long as you operate within your contingencies and meet your deadlines, you keep your earnest money. The horror stories you've heard are almost always cases where the buyer waived a contingency they shouldn't have, or missed a deadline they should have known about.

Can I get my earnest money back if I just change my mind?

In Maryland: not legally, if you're past your contingency periods. Before the inspection contingency expires (typically 7–10 days from contract), you can essentially walk for almost any reason because most buyers structure their inspection contingency to allow exit for "any unsatisfactory finding." But once you're past contingencies, walking away costs you the deposit.

This is exactly the protection earnest money is supposed to give the seller. It's why the system exists.

How does earnest money affect a competitive offer?

In Montgomery County right now, when I'm writing an offer against multiple competing offers, earnest money is one of the four levers I use to strengthen the position. The other three are:

• Higher price (or escalation clause)
• Tighter contingencies (or modified inspection contingency)
• Faster close timeline

Earnest money is the cheapest signal of the four because you get it back at closing. Putting up 3% EMD instead of 1% costs you nothing if you close — it just sits in escrow for 30 days. But it tells the listing agent and seller "this buyer is putting real money behind their words," which can matter when they're comparing five similar offers.

In a bidding war scenario, I'll often advise a buyer to bump EMD to 3% or even 5% for that exact reason. The cost is liquidity for 30 days. The benefit is real.

What happens to my earnest money if the deal falls through during inspection?

This is the most common scenario where buyers wonder whether they're going to get their money back. The answer depends on how your inspection contingency is written.

If your contingency gives you the right to terminate based on inspection findings (the standard structure in Maryland), and you deliver written notice of termination before the inspection contingency expires, you get the earnest money back in full. The title company or brokerage will need a signed release from both you and the seller, but assuming you're operating within the contract terms, the seller has no legal basis to refuse.

If your contingency is an "informational inspection" — meaning you can inspect but cannot terminate for normal repair items — your exit options are more limited. You can still walk based on major findings (foundation, roof, systems), but cosmetic or routine maintenance issues won't qualify.

Read your contingency language carefully before you sign. I review every contingency line by line with my buyers before they sign — this is exactly the kind of contract term that catches first-time buyers off guard if they don't.

What if the seller backs out — do I get extra money?

You get your earnest money back. Whether you get more depends on the contract and the breach.

In Maryland, the standard contract gives buyers limited remedies if the seller breaches: refund of earnest money, plus reimbursement of certain documented out-of-pocket costs (inspection fees, appraisal fees, application fees). It does not give you the right to compel the seller to sell at the contract price unless you sue for specific performance — which is rare in residential transactions and expensive to pursue.

For most buyers, a seller breach means you get your earnest money back and you move on. Frustrating, but it's the reality.

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The bottom line

Earnest money is one of the most important — and most misunderstood — parts of writing a Maryland real estate contract. The summary:

• 1% to 3% is standard in Montgomery County.
• Held by a title company or listing brokerage, never the seller.
• You get it back when you close, when you exercise a contingency, or when the seller breaches.
• You lose it if you default on the contract without a contingency to protect you.

If you're about to write an offer and you've never put earnest money down before, walk through every clause with your agent before you sign. Or call me directly — (301) 357-1170 — and I'll walk you through your specific situation.

For the bigger picture on what buying a house actually costs in Maryland, see the real cost of buying a home in Maryland — closing costs explained. And if you're earlier in the process, the first-time buyer guide for Montgomery County is the right starting point.