2026-10-28 · 4 min read · Orange County
What Is an Earnest Money Deposit and How Much Should I Put Down in California?
The short answer
What is an earnest money deposit, and how much should you put down when you buy in California? It's a good faith deposit you send to escrow soon after your offer is accepted, and it counts toward your down payment and closing costs at closing. California law doesn't set one required amount. The size is negotiated in your offer, and a liquidated damages clause generally caps what a seller can keep at 3% of the price on a home you plan to live in.
What Does an Earnest Money Deposit Actually Do?
The deposit shows the seller you're serious. Once your offer is accepted, the seller takes the home off the market for you, and the deposit is your commitment in return.
I'm Jeanette Nelson, a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas. I prepare first-time buyers before they write an offer, and the deposit is one of the first numbers we talk through.
The deposit is your money the whole time. If the purchase closes, it's credited to you and reduces what you bring to closing.
Where Does My Deposit Go?
In most Orange County purchases, you send the deposit to the neutral escrow company named in your contract. Your purchase agreement sets the deadline for getting it there.
The California Department of Real Estate (DRE) explains that a real estate broker who accepts funds belonging to others must place them in one of three places: a neutral escrow depository, the hands of the owner of the funds, or a trust account the broker maintains in California. The DRE encourages buyers to confirm their funds went into a properly designated account.
Before you send anything, call your escrow officer at a phone number you already trust and confirm the wiring instructions out loud. The Consumer Financial Protection Bureau (CFPB) warns that scammers target homebuyers with fake emails that change wiring instructions at the last minute. You can read more in my article on protecting your down payment from wire fraud.
How Much Should I Put Down?
There's no single right number. The amount is part of your offer, and it's worth deciding on purpose:
- Your comfort level. Pick an amount you can send quickly without touching money you need for closing costs or reserves.
- How strong you want the offer to look. A larger deposit can signal commitment to a seller comparing several offers.
- The 3% line. California Civil Code Section 1675 covers liquidated damages clauses in contracts for homes with up to four units when the buyer plans to live there. If the deposit kept as damages is 3% of the price or less, the law treats it as valid unless the buyer proves it unreasonable. Above 3%, the seller has to prove the larger amount is reasonable.
Your lender should also know the deposit amount, because they'll want to see where that money came from. If you're still deciding on price, see how to decide how much to offer on your first home.
Can I Lose My Earnest Money?
You can, depending on what your contract says and why the purchase doesn't close.
Contingencies are the protection. A typical California contract gives you time to review the inspection, the appraisal, your loan and the disclosures. If you cancel properly within those contingency periods, your deposit is generally returned. If you remove your contingencies and then back out without a reason the contract allows, the seller may have a claim to it.
A liquidated damages clause, if you and the seller both initial it, limits the seller's remedy to the deposit up to that 3% line. Read that section with care before you initial it. The rules on canceling are covered in can I back out of a home purchase in California.
This is general information, not legal advice. For questions about your specific contract, talk with a real estate attorney.
How Does the Deposit Get Released if We Cancel?
Escrow generally won't release a deposit until both buyer and seller sign cancellation instructions. That protects everyone from a one-sided decision.
California Civil Code Section 1057.3 adds a safeguard. A party who doesn't sign the release within 30 days of a written demand, without a good faith dispute, can owe treble damages of at least $100 and no more than $1,000, plus attorney's fees. Most cancellations never get close to that. The rule simply gives both sides a reason to act in good faith.
Let's Start With a Conversation
If you're getting ready to write your first offer, I'd love to walk through the deposit, the contingencies and your timeline with you first. Call or text me at 714.366.8575 | DRE: 01397168, or contact me. Jeanette Nelson is a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas.
Frequently asked questions
Is earnest money the same as my down payment?
No. Earnest money is sent early, soon after acceptance. At closing it's credited toward your down payment and closing costs, so it isn't an extra cost.
When is the deposit due?
Your purchase agreement sets the deadline, often counted in days after acceptance. Have the funds ready before you write the offer.
Is there a required percentage in California?
No. The amount is negotiated. The 3% figure in Civil Code Section 1675 limits what a seller can keep as liquidated damages on a home you plan to live in. It isn't a required deposit size.
Can I pay the deposit with a check instead of a wire?
Sometimes. Ask your escrow officer what they accept and confirm instructions by phone at a number you already know.