(It’s also known as Good Faith Money or EMD)
Quick Answer
An earnest money deposit (EMD) — also called a good faith deposit or contract deposit — is a sum of money a buyer submits with their offer to purchase a home. In Maryland, it’s typically 1% of the purchase price, though it can range from $500 to several thousand dollars depending on the price point and market conditions. The money is held in a neutral escrow account and applied toward the buyer’s closing costs at settlement.
What is an Earnest Money Deposit?
When a buyer makes an offer on a home in Maryland, they back it up with money — not just words. That’s the earnest money deposit. It signals to the seller that the buyer is financially capable and genuinely committed to completing the purchase.
The terms earnest money deposit, EMD, good faith deposit, good faith money, and contract deposit all refer to the same thing: the initial money a buyer puts forward at the time of contract formation.
This deposit is not the same as a down payment. A down payment is paid at closing and is tied to your loan terms. The earnest money deposit is paid upfront — often within a few days of an accepted offer — and is later credited toward your closing costs.
Is Earnest Money Required in Maryland?
Technically, Maryland law does not require an earnest money deposit. However, in practice, submitting an offer without one is a serious disadvantage. Sellers in Maryland expect buyers to include an earnest money deposit as a show of good faith. An offer without one signals risk and will almost always lose to a comparable offer that includes a deposit.
Think of it this way: the earnest money deposit is your way of saying, “I’m serious enough about this property to put real money on the line.”
(Example of the part of the Contract where Earnest Money is Specified)
How Much Earnest Money Is Standard in Maryland?
There’s no fixed statewide requirement, but here are the general norms in Carroll County and Central Maryland:
- 1% of the purchase price is the most common benchmark
- On lower-priced homes (under $200,000), flat amounts of $1,000–$2,500 are common
- In competitive markets or multiple-offer situations, buyers often increase their deposit to 2–3% to appear stronger
- Sellers do factor in the EMD amount when evaluating competing offers — a higher deposit signals a more committed, financially stable buyer
Seller’s Perspective: As a listing strategist, I advise my seller clients to look at earnest money as one indicator of buyer strength. A higher deposit doesn’t guarantee a clean closing — but it does raise the stakes for the buyer and reduce the likelihood of a frivolous walkaway.
How Does Earnest Money Work in Maryland?
Here’s the step-by-step flow:
- If the deal falls through — Who gets the money depends on why the contract was terminated (more on this below)
- 2. Offer is written — The buyer specifies the earnest money amount in the contract
- 3. Offer is accepted — The clock starts; the buyer typically has 1–5 business days to deposit the funds
- 4. Funds are deposited — Into an escrow account held by a title company or real estate brokerage (not the seller)
- 5. Contract proceeds — Inspections, appraisal, and loan approval happen during this window
- 6. At closing — The earnest money is credited toward the buyer’s closing costs
Who Holds the Earnest Money?
In Maryland, earnest money must be held in a non-interest-bearing escrow account by a neutral third party — not the seller. The holder is typically one of the following:
- A title company (most common in Carroll County and surrounding areas)
- The buyer’s agent’s brokerage (if they maintain an escrow account)
- Occasionally, the seller’s agent’s brokerage
In most Maryland transactions, the buyer has the right to choose who holds the deposit. Some brokerages do not hold escrow funds, in which case the title company steps in automatically.
How to Pay Earnest Money
Acceptable forms of payment in Maryland include:
- Personal check
- Cashier’s check
- Wire transfer (increasingly common, especially on higher-priced homes)
Cash is generally not accepted. Once you’ve wired or submitted the check, the funds are deposited into escrow — not released until closing or contract termination.
Can You Get Your Earnest Money Back?
Yes — under the right circumstances. Maryland contracts include contingencies that protect buyers and allow for a full refund of the deposit. Common scenarios where buyers typically get their money back include:
- Inspection contingency: If the inspection reveals issues and the parties can’t reach an agreement on repairs, buyers can void the contract within the specified timeframe and receive a full refund
- Financing contingency: If your mortgage loan is denied, you are generally entitled to your earnest money back
- Appraisal contingency: If the home appraises below the contract price and the buyer and seller can’t agree on terms, the buyer may be able to exit with their deposit intact
The key is timing. Each contingency has a deadline written into the contract. Miss the deadline, and you may forfeit your right to void — and forfeit your deposit. A good buyer’s agent tracks these dates as a core part of their job.
Can You Lose Your Earnest Money ?
Yes. If a buyer defaults on the contract — meaning they walk away without a valid contingency to back them up — the seller is generally entitled to keep the earnest money deposit. This is called liquidated damages, and it’s the reason the deposit amount matters: it represents the agreed-upon financial consequence of a buyer’s breach.
Sellers cannot sue for additional damages beyond the EMD amount in most standard Maryland residential contracts — the deposit is the limit of liability.
What Happens if There’s a Dispute?
If the buyer wants their money back and the seller disagrees, the funds remain frozen in the escrow account until:
- Both parties sign a release of escrow form (a Maryland-specific document), or
- The dispute is resolved through mediation or legal action
In some cases, funds have remained in escrow for years when parties couldn’t reach a resolution. This is rare, but it does happen — and it’s one more reason to have an experienced agent managing your transaction.
Example of the terms of the Escrow Agreement in the Maryland real estate contract
How Is Earnest Money Applied at Closing?
At settlement, the earnest money is credited toward your total amount due at closing — it’s not returned as a separate check. Your closing disclosure will show the deposit as a credit, reducing the amount you need to wire to the title company on closing day.
If you’ve overpaid (which can happen due to title company wire requirements), you’ll receive a check for the difference at or after settlement.
Maryland Escrow Agreement: What Is It?
When a title company holds the earnest money, both parties sign a Maryland Escrow Agreement — a legally binding document that outlines:
- Who is holding the funds
- The conditions under which the money is released
- What happens in the event of a dispute
This form is typically included with the initial offer package and is part of the Maryland contract of sale.
Example of the Maryland Real Estate Escrow Agreement
FAQ: Earnest Money in Maryland
Q: Is earnest money the same as a down payment? No. The earnest money deposit is paid upfront when the offer is accepted. The down payment is paid at closing. The EMD is applied toward closing costs, not added on top of them.
Q: What happens to earnest money if the seller backs out? If the seller defaults on the contract, the buyer is entitled to a full refund of their earnest money deposit.
Q: Who decides how much earnest money to offer? The buyer proposes the amount, but sellers can counter or set expectations. Your buyer’s agent should advise you based on current market conditions in the specific area you’re buying.
Q: Can earnest money be gifted? Yes. Earnest money can be provided by the buyer or gifted by a family member, similar to how down payment gift funds work.
Q: What if I’m buying with a USDA or VA loan (no down payment)? You may still need to provide an earnest money deposit. Even no-down-payment loans require the buyer to show financial commitment at the contract stage.
The Bottom Line for Maryland Buyers and Sellers
Earnest money isn’t just a formality — it’s a financial commitment that shapes how sellers perceive your offer and how your transaction is structured from day one. Getting the amount right, the timing right, and the contingencies right can mean the difference between a smooth transaction and a costly dispute.
Whether you’re buying or selling in Carroll County, Westminster, Eldersburg, Sykesville, or anywhere in Central Maryland, working with an agent who understands local norms and contract strategy matters.
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Melissa Spittel is a Listing & Pricing Strategist with Corner House Realty, specializing in Carroll County and surrounding communities in Maryland and Southern Pennsylvania. She is licensed in Maryland and Pennsylvania.
After over a decade helping clients across Maryland and Pennsylvania, she brings a unique blend of deep local knowledge, sharp market insight, and a focused, confident approach to every transaction. Think of Melissa as your seasoned guide, ready to make your real estate journey straightforward and successful.
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