When you’re ready to make an offer on a home in Utah, there’s one term that almost always comes up: earnest money. For many first-time buyers, this can sound confusing, even intimidating. Is it just another fee? Do you get it back? What happens if something falls through?
Earnest money is one of the most important parts of showing a seller you’re serious about buying their home. It’s not a trick or a hidden cost, it’s your way of putting skin in the game. Let’s break down exactly what earnest money is, how it works here in Utah, and why it matters when you’re buying or selling.
What Is Earnest Money?
Earnest money is a deposit that a buyer includes with their offer to show good faith. It signals to the seller that you’re committed to the purchase and willing to back it up financially. In Utah, earnest money is almost always part of the offer, and without it, your offer may not be taken seriously.
The money isn’t extra on top of what you’re already paying. Instead, it gets applied toward your down payment or closing costs once the deal is finalized. Think of it as an early down payment that proves you’re not just window shopping.
How Much Earnest Money Do You Need in Utah?
There’s no set rule, but in Utah most earnest money deposits range between 1% and 3% of the purchase price. On a $450,000 home, that could mean putting down anywhere from $4,500 to $13,500.
The exact amount often depends on how competitive the market is. In Salt Lake City, where multiple-offer situations are common, buyers sometimes increase their earnest money to stand out. In slower markets such as some rural areas, a smaller amount may still be acceptable.
What Happens to Earnest Money During the Transaction?
Once your offer is accepted, your earnest money doesn’t go to the seller directly. Instead, it is held in an escrow account by the title company until closing. This protects both sides. The seller knows you’re serious, and you know your money is safe.
At closing, your earnest money is credited back to you and applied toward your down payment or closing costs. You don’t lose it unless something in the contract gives the seller the right to keep it.
When Can You Get Earnest Money Back?
Utah’s standard Real Estate Purchase Contract (REPC) outlines situations where a buyer can back out and still receive their earnest money refund. Common examples include:
Financing Contingency
If your loan is denied after a good faith effort, you can usually walk away with your earnest money.
Inspection Contingency
If the inspection reveals serious issues and you choose not to proceed, you’re protected. For more on what inspectors often look for, check out Common Red Flags to Look for During a Home Walkthrough.
Appraisal Contingency
If the home appraises for less than the agreed price and the deal falls apart, you typically get your deposit back.
The key is meeting deadlines and following the contract carefully. If you back out for reasons not covered by the contract, the seller may be entitled to keep your earnest money.
Why Earnest Money Matters in Utah’s Market
In today’s competitive Utah real estate market, earnest money can make or break an offer. Sellers view a larger earnest money deposit as a sign of strength and commitment. For buyers, it’s a balancing act. You want to show you’re serious, but you also don’t want to overextend.
This is where having a local expert by your side makes all the difference. In my Buyer’s Guide, I go into detail about how to structure a strong offer while protecting your interests.
Real Estate Perspective
Earnest money isn’t just a formality, it’s a psychological and financial tool that moves deals forward. For buyers, it’s proof of intent. For sellers, it’s reassurance. And for both sides, it’s an important safeguard that keeps the process fair.
If you’re considering how much earnest money to include, my advice is to look at the bigger picture. Every market in Utah is a little different. In Salt Lake City, sellers may expect higher deposits. In places like Eagle Mountain or Ogden, you might have more flexibility.
And remember, earnest money goes directly toward your purchase. It’s not wasted, it’s part of your investment in your new home.
Final Thought
Earnest money may sound complicated, but once you understand how it works, it becomes one of the clearest parts of the homebuying process. It shows commitment, builds trust, and ultimately gets you one step closer to your dream home in Utah.
If you’re ready to start the buying process and want guidance on making a strong, safe offer, I’d love to help. You can also estimate your future payments with my Mortgage Calculator to get a clear picture before you start shopping.
