What Is Earnest Money and How Much Should You Put Down in Arizona 2026

When you make an offer on a home in Arizona, there is a line on the purchase contract that trips up almost every first-time buyer.

Earnest money.

What is it? How much should you put down? What happens to it if the deal falls apart? Can you lose it?

These are the questions I answer almost every week. Let me clear up the confusion completely.

What Is Earnest Money

Earnest money — sometimes called a good faith deposit — is a sum of money you put up after your offer is accepted to show the seller that you are serious about buying their home.

Think of it this way. You make an offer. The seller accepts. The home comes off the market. The seller is now committed to you — they are no longer showing the home or accepting other offers. They have taken a real financial risk by choosing you.

Earnest money is your commitment in return. It demonstrates to the seller that you are moving forward with intention, not just testing the market.

Importantly — earnest money is NOT your down payment. It is a separate deposit. However, if your transaction closes successfully, your earnest money is applied toward your down payment or closing costs at closing. You do not pay it and also pay your full down payment separately.

Who Holds the Earnest Money

In Arizona, earnest money is held by a neutral third party — almost always the escrow or title company named in your purchase contract. The money does NOT go directly to the seller.

This protects both parties. The seller cannot access the funds before closing. And the buyer’s money is held securely by a licensed professional who follows strict rules about when and how it can be released.

Arizona law requires that earnest money be deposited into the escrow account no later than the second banking business day after receipt. As a buyer, you should plan to wire or deliver your earnest money within one business day of contract acceptance.

How Much Earnest Money to Put Down in Arizona

In Arizona, earnest money is not legally required — but not offering it is a serious mistake. Sellers in Arizona fully expect it and will not take your offer seriously without it.

The standard in the East Valley residential market is 1% of the purchase price.

On a $450,000 home: $4,500 earnest money
On a $550,000 home: $5,500 earnest money
On a $650,000 home: $6,500 earnest money

In some areas of Arizona, particularly Scottsdale and higher-end markets, 2% is more common. For luxury properties the percentage can be higher.

When to Offer More Than 1%

In a competitive situation — multiple offers on the same home — offering more earnest money can make your offer stand out. If two offers come in at the same price, a seller may choose the buyer offering $10,000 in earnest money over the buyer offering $4,500 because it signals stronger financial commitment.

In today’s East Valley buyer’s market, multiple offer situations are less common than they were in 2021 and 2022. Most buyers do not need to offer more than 1% to be competitive. Your realtor will advise you based on the specific situation.

Is Earnest Money Refundable

This is the question that creates the most anxiety for buyers. And the answer is — it depends on the circumstances.

The Arizona Residential Resale Real Estate Purchase Contract — the standard form used in nearly all Arizona home purchases — includes several contingency periods during which you can cancel the contract and receive a full refund of your earnest money.

Inspection Contingency — 10 Days

After your offer is accepted you have 10 days to complete your due diligence including the home inspection. If you discover something during this period that you cannot live with, you can cancel the contract and your earnest money is returned to you in full. You can also use this period to request repairs or credits from the seller. If the seller refuses and you cannot reach agreement, you can cancel and receive your earnest money back — as long as you provide timely written notice before the 10-day period expires.

Appraisal Contingency

If the home appraises below the purchase price and the seller is unwilling to lower the price or negotiate a solution, you can cancel the contract and receive your earnest money back. This protects you from overpaying for a home that the market determines is worth less than you agreed to pay.

Financing Contingency

If your loan is denied despite good-faith efforts to secure financing, you can cancel the contract and your earnest money is returned. This is the final deadline in the contract — the last point at which you can exit without losing your deposit.

When Can You Lose Your Earnest Money

You risk losing your earnest money if: You simply change your mind and decide not to buy — without a contingency-based reason. You miss a contract deadline without an agreed-upon extension. You waive your inspection or financing contingencies and then try to cancel for those reasons. You fail to secure financing due to a major financial change you made after pre-approval — like buying a car or opening new credit.

How to Protect Your Earnest Money

Never make your earnest money non-refundable before the inspection period expires. I occasionally see sellers try to request this — it is almost always a red flag. A well-priced home in good condition does not need to demand non-refundable earnest money from the start.

Never send earnest money directly to the seller. It should always go to the escrow or title company. If anyone asks you to wire money directly to the seller or to a person — stop and call your realtor immediately. This is a common real estate wire fraud scheme.

Never waive your inspection contingency unless you have a very specific reason to do so and you fully understand what you are giving up. In today’s buyer’s market there is almost never a reason to waive inspection. Do not let enthusiasm override your protection.

Always submit your earnest money on time. Missing the deadline can put your deposit at risk and potentially give the seller grounds to cancel the contract.

A Real Example of How Earnest Money Works

Here is a straightforward example.

You make an offer on a $500,000 home in Gilbert. The seller accepts. You submit $5,000 in earnest money (1%) to the title company via wire transfer within one business day.

Your 10-day inspection period begins. The inspector finds the AC unit is 14 years old and likely needs replacement within 2-3 years. You ask the seller for a $6,000 credit toward AC replacement. The seller offers a $3,000 credit. You accept.

The transaction moves forward. At closing, your $5,000 in earnest money is applied toward your closing costs and down payment. You do not pay it again separately.

If instead the seller had refused any credit at all and you decided the risk was too great — you would cancel the contract in writing before the inspection period expires, and your $5,000 would be returned to you in full.

Questions About Your Specific Offer?

Every transaction is different. I walk every buyer I work with through the earnest money process before we make an offer — so there are never any surprises.

Heather Seegmiller
Licensed Arizona Realtor
Better Homes and Gardens Real Estate S.J. Fowler
(480) 316-2667 | heather.az.properties@gmail.com | heatherarizonarealtor.com
License SA715388000 AZ