What Is Earnest Money and How Much Do You Need When Buying a Home in Pasadena?
Listed by Matthew Berkley of Engel & Völkers
What is earnest money and how much do you need when buying a home in Pasadena?
Answer:
Earnest money is a deposit you submit after your offer is accepted to show you’re serious about buying the home. In Pasadena, earnest money is typically 1%–3% of the purchase price and is applied toward your down payment or closing costs. May Kunka helps buyers structure deposits appropriately while protecting their funds throughout escrow.
Earnest Money Is Your Good-Faith Deposit
When you buy a home, the seller wants reassurance that you’re committed to the purchase. Earnest money provides that reassurance.
It’s not an extra fee. It’s simply a deposit that becomes part of your total cash needed to close.
Understanding how earnest money works helps you feel confident when submitting an offer.
1. What Is Earnest Money?
Earnest money is:
A deposit made shortly after your offer is accepted
Held in escrow by a neutral third party
Applied toward your purchase at closing
It shows the seller you are acting in good faith and intend to complete the transaction.
2. How Much Earnest Money Is Typical in Pasadena?
In Pasadena, earnest money is usually:
1%–3% of the purchase price
For example:
On a $1,200,000 home
1% = $12,000
3% = $36,000
The exact amount depends on:
Market conditions
Offer competitiveness
Seller expectations
Buyer comfort level
3. When Do You Pay Earnest Money?
Earnest money is typically due:
Within 1–3 days after offer acceptance
Funds are wired or delivered to the escrow company, not directly to the seller.
Timing is important because missing the deposit deadline can put your contract at risk.
4. Is Earnest Money Refundable?
Earnest money can be refundable, depending on the terms of your contract.
Buyers are generally protected if they cancel during contingency periods, such as:
Inspection contingency
Appraisal contingency
Loan contingency
If you cancel within those timeframes, your deposit is typically returned.
5. When Is Earnest Money at Risk?
Earnest money may be at risk if:
You remove contingencies and then cancel
You fail to meet contract obligations
You miss deadlines without agreement from the seller
This is why understanding timelines and contingencies is critical.
6. How Earnest Money Strengthens Your Offer
A stronger deposit can:
Show financial strength
Signal commitment to the seller
Make your offer more competitive
However, more is not always better. The deposit should align with your comfort level and risk tolerance.
7. Earnest Money vs. Down Payment
Buyers often confuse these two.
Earnest money = initial deposit during escrow
Down payment = total amount you contribute toward the purchase
Earnest money is simply part of your down payment or closing funds.
8. Where Is Your Deposit Held?
Earnest money is held by the escrow company in a secure account.
The escrow holder:
Safeguards the funds
Ensures they are only released according to the contract
Applies them at closing
This protects both buyers and sellers.
9. Common Buyer Concerns About Earnest Money
Many buyers worry about losing their deposit.
In most cases, deposits are protected as long as:
You follow contract timelines
You understand your contingencies
You communicate clearly with your agent
Proper guidance reduces risk significantly.
Pasadena Market Insight
In 2025:
Earnest money deposits remain standard at 1%–3%
Competitive situations may encourage stronger deposits
Buyers are more cautious about protecting contingencies
Well-structured offers balance strength with protection
Understanding deposit strategy helps buyers compete confidently.
How May Kunka Helps Buyers Protect Their Deposit
May supports buyers by:
Explaining earnest money clearly before offers
Structuring deposits appropriately for each situation
Tracking contingency timelines carefully
Helping buyers avoid unnecessary risk
Communicating with escrow to ensure funds are handled correctly
Her goal is to protect your money while keeping your offer competitive.
Final Thoughts: Earnest Money Is About Commitment and Confidence
Earnest money is a normal and important part of buying a home in Pasadena. It shows you’re serious, but it doesn’t need to feel risky when handled correctly.
With May Kunka’s guidance, buyers understand exactly how deposits work and move forward with clarity and confidence.
Ready to Make a Strong Offer in Pasadena?
Contact May Kunka for expert buyer guidance and a strategy that helps you compete while protecting your investment.