Questions like:

• How much earnest money should I put down?  

• Who holds my earnest money?  

• Can I lose it?  

• Do I get it back at closing?  

...are some of the most common questions we hear from buyers across Roswell, Woodstock, Alpharetta, Canton, Marietta, Milton, and throughout North Georgia.

Understanding earnest money and Georgia real estate escrow rules can help you make informed decisions and avoid costly surprises during your real estate transaction.

What Is Earnest Money?

Simply put, earnest money is a good-faith deposit that shows a seller you're serious about purchasing their home.

Once your offer is accepted, you'll typically deliver your earnest money according to the terms of the purchase agreement. The funds are not paid directly to the seller. Instead, they're held in an escrow account by an agreed-upon holder until the transaction closes or the contract is terminated according to its terms.

Think of earnest money as demonstrating your commitment while helping protect both the buyer and seller throughout the transaction.

Who Holds Earnest Money in Georgia?

In most Georgia real estate transactions, earnest money is held by an escrow agent, which may be:

• A closing attorney  

• A real estate brokerage  

• Another agreed-upon escrow holder  

The escrow holder must follow Georgia real estate escrow rules and cannot simply release the funds because one party asks them to. If there's a dispute, the earnest money generally remains in escrow until both parties reach an agreement or another legally authorized resolution is provided.

This process helps protect everyone involved in the transaction.

How Much Earnest Money Should You Put Down?

There isn't a one-size-fits-all amount.

Several factors may influence the amount of earnest money a buyer offers, including:

• Current market conditions  

• Purchase price  

• Competition from other buyers  

• Seller expectations  

• Advice from your REALTOR®  

In a competitive market, a larger earnest money deposit may strengthen an offer, but buyers should never offer more than they're comfortable placing at risk.

Your real estate professional can help you determine what makes sense for your specific situation.

Can You Lose Your Earnest Money?

This is one of the biggest concerns for homebuyers—and the answer is: it depends on the terms of your purchase agreement.

Certain contract provisions may allow a buyer to terminate the agreement under specific circumstances. In other situations, failing to meet contractual obligations could place the earnest money at risk.

Every contract is different, which is why it's important to:

• Understand your deadlines.  

• Communicate with your REALTOR®.  

• Stay in close contact with your lender.  

• Ask questions if you're unsure about your obligations.  

Missing important contractual deadlines can have serious consequences.

Do You Get Your Earnest Money Back?

In most successful real estate transactions, buyers don't actually "get the money back."

Instead, the earnest money is typically credited toward the buyer's funds due at closing, reducing the amount they need to bring to the closing table.

If a transaction does not close, whether the earnest money is returned depends on the specific terms of the contract and the circumstances surrounding the termination.

Common Misconceptions About Earnest Money

"The seller gets my earnest money immediately."

False.

The funds remain in escrow until they're properly disbursed according to the contract.

"Earnest money is the same as my down payment."

Not exactly.

Your earnest money is a deposit made early in the transaction. At closing, it's typically applied toward your total cash required to close, which may include your down payment and closing costs.

"If I change my mind, I automatically lose my earnest money."

Not necessarily.

Whether earnest money is refunded depends on the terms of your purchase agreement and how the transaction unfolds.

Why Earnest Money Matters

For buyers, earnest money demonstrates commitment.

For sellers, it provides reassurance that a buyer intends to move forward with the purchase.

For everyone involved, the escrow process creates accountability while protecting both parties throughout the transaction.

Understanding how earnest money works can make the Georgia home-buying process feel much less intimidating.

Working With an Experienced Closing Attorney

Buying a home is one of the largest financial decisions you'll ever make, and having an experienced closing attorney helps ensure the legal side of your transaction is handled carefully and professionally.

At Cook & James, our attorneys work alongside REALTORS®, lenders, buyers, and sellers throughout Roswell, Woodstock, Alpharetta, Canton, Cumming, Marietta, Milton, Johns Creek, and communities across Metro Atlanta and North Georgia to help create smooth, efficient closings.

Whether you're purchasing your first home or your fifth, we're here to answer questions and help guide you through every step of the closing process.

Frequently Asked Questions

Is earnest money required in Georgia?

While earnest money is common in Georgia real estate transactions, the amount and terms are negotiated between the buyer and seller as part of the purchase agreement.

Who keeps the earnest money if a deal falls through?

That depends on the terms of the contract and the circumstances surrounding the transaction. If there's a dispute, the funds are generally held in escrow until the matter is resolved according to the applicable procedures.

Is earnest money refundable?

It may be, depending on the contract terms and why the transaction did not close. Buyers should review their purchase agreement carefully and consult their REALTOR® or closing attorney if they have questions.

When is earnest money due?

The purchase agreement specifies when the earnest money must be delivered. Buyers should review those deadlines carefully and ensure funds are submitted on time.

About the Author

Bonnie Timms is an attorney at Cook & James, where she helps buyers, sellers, REALTORS®, and lenders navigate residential real estate transactions across Georgia. Bonnie is passionate about making the closing process approachable by breaking down complex legal topics into practical, easy-to-understand guidance.

Through the Cook & James blog, Bonnie shares insights on Georgia real estate law, earnest money, escrow procedures, title insurance, contracts, and the home-buying process, helping consumers and real estate professionals make informed decisions with confidence.