How Earnest Money Works in Washington State (And How Much Should You Offer in 2026?)

How does earnest money work in Washington state real estate?

In Washington state, earnest money is a good-faith deposit made by the buyer when submitting a purchase offer, governed by NWMLS Form 21 and RCW 64.04.005. It is typically 1–3% of the purchase price, due within two days of mutual acceptance, and held in escrow until closing -where it is credited toward the buyer’s down payment. If the buyer uses a valid contingency (inspection, financing, or appraisal) within the allowed timeline, the earnest money is fully refundable. If the buyer defaults without a valid contingency, they risk losing their earnest money -up to a maximum of 5% of the purchase price under Washington state law. In King County’s 2026 market, 1–2% is standard; offering above that does not significantly improve offer competitiveness in the current environment.

One of the first questions I get from buyers writing their first offer: “How much earnest money do I need to put down?” And usually right behind it: “Can I lose it?” Both are the right questions. Here’s exactly how earnest money works in Washington.

What Is Earnest Money, and Why Does It Matter?

Earnest money is your proof that you’re serious. When you make an offer to purchase a home in Washington state, you include an earnest money deposit. It tells the seller: “I’m committed enough to put real money at stake.” If the deal falls apart through no fault of your own -because of an inspection finding, a financing issue, a low appraisal -you get your money back. If you simply change your mind and walk away without a valid reason, you may lose it.

It’s not a fee. It’s not payment to anyone. It’s a deposit that sits in an escrow account and is credited toward your down payment at closing.

Your earnest money is only one piece of the cash you actually bring to the table. For the full rundown of what buyers pay at closing, see our guide to closing costs for buyers in Edmonds, WA.

The Washington State Rules You Need to Know

Form 21 and the Two-Day Rule

Under Form 21 (the Residential Purchase and Sale Agreement), the default delivery date for earnest money is two banking days after mutual acceptance. Missing this deadline is a problem -it can be grounds for the contract to be terminated. Put the date in your calendar and make sure your agent confirms receipt.

How Much Can You Lose?

Washington state law (RCW 64.04.005) limits liquidated damages to 5% of the purchase price. So even if you put 10% down as earnest money, the most the seller can typically claim if you default is 5%. That said, 1–3% is standard -there’s no benefit to offering more than is expected.

Who Holds the Earnest Money?

The earnest money is typically held by the buyer’s agent’s brokerage or by the escrow/title company. It is not paid to the seller directly. It sits in a neutral account until closing -or until a dispute resolution is needed.

When Is Earnest Money Refundable?

The short answer: almost always, if you follow the rules.

• Inspection contingency: You can terminate and get your earnest money back if you find something you can’t live with -or use the findings to negotiate repairs or a credit.
• Financing contingency (Form 22A): If you are unable to obtain financing as outlined in the contract, you can terminate and get your earnest money returned. The financing contingency must be waived by a specific deadline.
• Appraisal contingency: If the home appraises below the purchase price, you can renegotiate, cover the gap, or terminate and receive your earnest money back.

The key word is: use the contingency within the timeline. Missing a contingency deadline eliminates your protection, even if you have a legitimate reason to terminate.

When Can You Lose Earnest Money?

• You walk away without a valid contingency. If you’ve waived your inspection and financing contingencies and then decide you don’t want the house, you’ve given up your protection.
• You miss a contingency deadline. If your financing contingency expires on day 21 and you try to terminate on day 24, your protection may not apply.
• You fail to close without a valid reason. If you can’t get financing because you misrepresented your financial situation, that’s a default -not a financing contingency termination.

How Much Earnest Money Should You Offer in 2026?

In King County’s current market, 1–2% of the purchase price is standard.

• On a $700,000 home: $7,000–$14,000
• On a $900,000 home: $9,000–$18,000

Going higher doesn’t significantly help your offer in most situations. In a multiple-offer scenario, sellers care far more about price, terms, and contingency structure than earnest money amount. A clean offer at the right price with 1.5% earnest money beats a weak offer at 3%.

The “No Earnest Money” Offer: Just Don’t

Washington doesn’t legally require earnest money. You can, technically, make an offer with $0 earnest money. Don’t. Sellers see a $0 earnest money offer as a signal that the buyer isn’t serious or doesn’t have their finances together. Put in at least 1%.

Frequently Asked Questions

How long do I have to provide earnest money in Washington state?
Under NWMLS Form 21, the default is two banking days after mutual acceptance. Make sure your agent confirms the earnest money is received on time -a missed deadline can put the contract at risk.

Is earnest money part of the down payment in Washington?
Yes. Earnest money is credited toward your down payment and closing costs at closing. It’s not an additional cost -it’s just the portion of your down payment that’s paid early to demonstrate commitment.

Can a seller keep my earnest money if I back out of the deal?
A seller can claim your earnest money only if you default without a valid contingency. If you terminate during an active inspection, financing, or appraisal contingency window, your earnest money is fully refundable. Washington state law caps the seller’s claim at 5% of the purchase price.

What happens to earnest money if the deal falls through?
If both parties agree the termination is valid, the earnest money is released back to you -usually within a few days. If there’s a dispute, it stays in escrow until the parties reach an agreement or the matter is resolved through mediation or legal action.

Should I waive the inspection contingency to make my offer stronger in Seattle?
Waiving the inspection contingency removes one of your primary protections. In 2026’s market -with more inventory and less competition -most buyers do not need to waive the inspection contingency to win. In Seattle’s older housing stock (many homes are 40–100 years old in neighborhoods like Ballard, Edmonds, and West Seattle), there will almost always be findings on inspection. Keeping your inspection contingency is generally the right call.

Writing your first offer in King or Snohomish County? Text HOME to 206-245-8813 -Emily will walk you through the earnest money amount, contingency strategy, and offer structure that gives you the best shot at winning without overexposing yourself.

For a complete overview of the home buying process in Washington state, download the Buyer’s Guide here.

About Emily Cressey
Emily Cressey is a REALTOR®, Broker, and Team Lead at HomePro Associates at Keller Williams Greater Seattle. She has guided hundreds of buyers through Washington state’s offer process. Text HOME to 206-245-8813.