Earnest Money Deposits in Westside Los Angeles: What They Are, How Much to Offer, and When You Can Lose Them

When you make an offer on a home in California, you include a check. Not to the seller. To escrow. It is called earnest money, also known as a good faith deposit, and it is the first real financial commitment you make in the home-buying process.

Most buyers have a general idea that earnest money exists. Few understand exactly how much to offer, what the rules are for getting it back, and what actually happens when things go wrong. Here is how it works in Westside Los Angeles.

Earnest money is a deposit that goes into escrow when your offer is accepted. It is not a fee that disappears. It is part of your down payment, held in a neutral third-party account until the deal closes or falls apart.

When the transaction closes successfully, the earnest money applies toward your purchase price. If the deal falls through, what happens to that money depends entirely on the circumstances and what your purchase contract says.

In California, earnest money is typically 1% to 3% of the purchase price. On a $1.5 million home in Playa del Rey or Mar Vista, a 1% deposit is $15,000. At 3%, it is $45,000. These numbers are real, and they need to come from a verified account on a firm timeline.

In a competitive offer situation, a higher earnest money deposit signals to the seller that you are serious and financially positioned to close. It does not mean you win the home, but a low deposit in a multiple-offer situation can work against you. I talk through deposit strategy with every buyer before we write the offer, because the right number depends on the competition and what the seller's situation is. For context on what else makes an offer stand out, see how to win a competitive offer in Westside Los Angeles.

In California, the residential purchase agreement provides for an initial deposit, due within three business days of acceptance, and allows for an increased deposit later in escrow if the parties negotiate one. When there is an increased deposit, the two add up to the total agreed amount.

This timeline matters because your financial exposure increases as the transaction progresses. After you remove your contingencies, the full deposit is generally at risk if you back out without a valid contractual reason. Knowing that before you sign protects you from surprises later in the process.

In California, your earnest money is protected by contingencies. The three standard ones are the inspection contingency, the appraisal contingency, and the loan contingency. While these are active, you can cancel the contract for the reasons they cover and get your deposit back.

If the home fails inspection and you decide not to proceed, the inspection contingency lets you walk. If the home does not appraise at the purchase price and the parties cannot agree on terms, the appraisal contingency protects your deposit. If your financing falls through for a documented reason, the loan contingency covers you.

The window for each contingency is negotiated in the contract. Shorter contingency periods are more attractive to sellers in competitive markets. Knowing when to push for a longer window and when a tighter one is acceptable is part of what I do for you. For a fuller picture of the purchase process in Westside LA, see the Westside LA buyer's guide.

You lose your earnest money when you back out of a deal after you have released your contingencies, without a legitimate contractual reason to cancel. Once contingencies are removed, the seller has stopped marketing the home and is counting on your transaction to close. If you change your mind at that stage, the seller is generally entitled to the deposit as liquidated damages, capped at 3 percent of the price on an owner-occupied purchase of one to four units.

This is why releasing contingencies is a real, considered decision. You do not do it until you are sure. The article on the biggest mistakes buyers make in Westside Los Angeles covers this and several other decisions that cost buyers money when they move too fast.

If the seller cancels the transaction without a legitimate reason, you are entitled to your full deposit back. Depending on the circumstances, you may also have additional remedies available under the purchase contract. California law is clear about what happens when either party fails to perform, and your contract spells out the options.

The deposit is part of your down payment. When the transaction closes, your lender funds the loan, you wire the remaining balance to escrow, and the earnest money has already been credited toward your purchase price by the escrow company. You do not pay more overall because you put money in early. What changes is the timing and the exposure during the transaction.

For a full breakdown of what buyers pay at closing in California, see closing costs for buyers in California.

When homes are drawing multiple offers in Playa del Rey, Marina del Rey, or Mar Vista, sellers pay attention to details beyond price. Deposit size, contingency periods, and the credibility of your financial documentation all factor into how sellers read offers. I helped a buyer win a home out of 13 competing offers, and the structure of the offer, including the deposit strategy, was part of what made it work.

If you want to talk through how to put together the strongest offer for your situation, I am here. I stay in touch. No pressure, just real answers.

Book a consultation at firstkeypacific.com/contact or email me at bobejo@firstkeypacific.com.

The buyers who do well in Playa del Rey are the ones who understood the ground before they started touring. If you want that briefing before you look at anything, let me know. First Key Pacific starts every buyer the same way.