What Is Earnest Money (EMD) in Real Estate?

An Earnest Money Deposit (EMD) is a good-faith payment a home buyer makes to show they are serious about purchasing a property. The deposit is held in escrow and is applied toward the purchase at closing.

If a buyer cancels the contract without a valid contingency, the earnest money may be forfeited to the seller.

How Much Is Earnest Money in Michigan?

In Michigan, earnest money is negotiable, but most buyers put down 1% to 3% of the purchase price.

$300,000 home → $3,000–$9,000 deposit

Competitive markets → Higher deposits strengthen your offer

New construction or luxury homes → Often require more

A stronger deposit can help your offer stand out—especially in multiple-offer situations.

Is Earnest Money Required?

No—earnest money is not legally required in Michigan.

However, in real-world transactions, it is almost always expected. Submitting an offer without it can make sellers hesitant to accept.

Who Holds Earnest Money?

Earnest money is typically held in a licensed broker’s escrow account.

Applied to Your Down Payment

Used Toward Closing Costs

Credited Back to You at Closing

When Do You Lose Earnest Money?

You can lose your earnest money
if you violate the terms of your contract.

Missed Deadlines

Missing contingency deadlines for inspection, financing, or appraisal can put your deposit at risk.

Mortgage Documents

Failing to submit required mortgage documents on time can jeopardize your earnest money.

Inaccurate Information

Providing inaccurate financial information can create problems that affect your deposit.

Backing Out Late

Backing out after contingencies are removed is one of the most common ways buyers lose earnest money.

In short: once protections are gone, your deposit is at risk.

How Do You Protect Your Earnest Money?

The best way to protect your deposit is to stay ahead of deadlines and work with an experienced real estate team.

Understand your contract before signing

Complete inspections on time

Stay responsive with your lender

Work with an agent who manages timelines closely

Expert Insight from Gwyn Daubenmeyer

Hear directly from the founder of The Integrity Team on how earnest money works and what buyers should watch for:

Buying a Home in Michigan? Don’t Risk Your Deposit

Earnest money is one of the most misunderstood parts of the home buying process—and one of the easiest places to make costly mistakes.

The right strategy can strengthen your offer, protect your deposit, and give you confidence throughout the transaction.

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Earnest Money FAQs

Can you get earnest money back?

Yes, earnest money is refundable if you cancel the contract within agreed contingencies, such as inspection, financing, or appraisal. If those deadlines pass and you back out, you may lose your deposit.

How long do you have to deposit earnest money?

In most Michigan real estate transactions, buyers must submit earnest money within 1–3 days after an offer is accepted, depending on the contract terms.

Is earnest money applied to closing costs?

Yes, earnest money is credited toward your closing costs or down payment at closing—it is not an extra fee.

What happens if the deal falls through?

If the deal falls through due to a valid contingency, the earnest money is typically returned to the buyer. If not, it may be awarded to the seller.

Who decides who gets the earnest money?

If there is a dispute, both parties must agree in writing on how the earnest money is distributed. If no agreement is reached, the issue may need to be resolved through mediation or legal action.

Is earnest money the same as a down payment?

No, earnest money is not the same as a down payment. It is a deposit made early in the transaction, but it is later applied toward your down payment or closing costs.