What Is Earnest Money and How Does It Work in Las Vegas?

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When a buyer makes an offer on your home, they'll include earnest money. This deposit shows they're serious. Here's what sellers need to know.

Earnest Money Defined

Earnest money (also called a "good faith deposit") is money the buyer puts down when making an offer. It's held in escrow until closing and shows the buyer is committed to the purchase.

Think of it as the buyer putting skin in the game. They have money at risk if they walk away without a valid reason.

How Much Is Typical?

In Las Vegas, earnest money typically ranges from 1-3% of the purchase price:

Higher earnest money signals a more serious buyer. In competitive situations, buyers may offer more to stand out.

Where Does It Go?

Earnest money is deposited into an escrow account held by:

• The title company (most common in Las Vegas)
• A licensed escrow company
• The buyer's brokerage (less common)

It's not released to you immediately. It sits in escrow until closing or until the contract specifies otherwise.

When It's Due

The purchase contract specifies when earnest money must be deposited, typically within 2-3 business days of offer acceptance. Late deposit can be grounds for contract cancellation.

What Happens at Closing

If everything goes smoothly, the earnest money is applied to the buyer's purchase. It becomes part of their down payment or closing costs. You don't receive it separately. It's part of the total proceeds.

When Buyers Can Get It Back

Buyers can typically get their earnest money refunded if they cancel due to:

Inspection contingency: They find issues during inspection and cancel within the allowed period.

Appraisal contingency: The home appraises below the purchase price and they can't or won't proceed.

Financing contingency: They can't obtain mortgage approval.

Title issues: Problems with title that can't be resolved.

Other contingencies: HOA review, home sale contingency, etc.

If a buyer cancels within their contingency periods for covered reasons, they get their earnest money back.

When You Keep the Earnest Money

You may be entitled to keep the earnest money if:

Buyer cancels without valid reason. They just change their mind after contingencies expire.

Contingencies have been waived or expired. The buyer no longer has contractual outs.

Buyer breaches the contract. They fail to perform their obligations.

However, collecting earnest money after a buyer default isn't automatic. Both parties must agree, or you may need to dispute it.

Disputed Earnest Money

When buyer and seller disagree about who gets the earnest money:

• Escrow cannot release funds without both parties' agreement or a court order
• Money may sit in escrow for months during dispute
• Mediation or legal action may be required
• Legal costs may exceed the earnest money amount

Most disputes get resolved through negotiation because fighting over $5,000-10,000 in legal fees isn't worth it.

What Sellers Should Watch For

Deposit timing. Make sure earnest money is deposited on time. Late deposits signal potential problems.

Deposit amount. Higher deposits indicate more serious buyers with more to lose.

Contingency periods. Know when each contingency expires. That's when the earnest money becomes more "at risk" for the buyer.

Proof of deposit. Your agent should confirm the earnest money has actually been deposited.

Earnest Money Red Flags

• Unusually low earnest money (under 1%)
• Late deposit after contract signing
• Requests to extend deposit deadline
• Buyer asking for unusual earnest money terms

These may indicate a buyer who isn't fully committed or has financial concerns.

The Bottom Line

Earnest money protects you by ensuring buyers have something to lose if they walk away without cause. It's applied toward the purchase at closing or potentially retained if buyers default. Pay attention to the amount and timing as indicators of buyer seriousness.

Have questions about evaluating offers and earnest money? Let's discuss what makes a strong offer.