Earnest money in California is a buyer’s good-faith deposit that shows serious intent to purchase a home. Once an offer is accepted, the money is typically placed into escrow and applied toward the buyer’s down payment or closing costs at closing. If the sale moves forward normally, the deposit is credited back to the buyer; if the buyer backs out without a contractually allowed reason, the seller may be entitled to keep it under the terms of the purchase agreement. Start your journey with LEAP's California real estate pre-licensing course.

In California, the amount of earnest money is negotiable, but it is often about 1% to 3% of the purchase price, depending on the market and the property. The purchase contract, contingencies, and escrow instructions determine exactly when the deposit is due and when it can be refunded. Common contingencies include inspections, financing, appraisal, and review of disclosures. If a buyer cancels within an allowed contingency period, the earnest money is usually returned.

Timing matters in California real estate because deposits are often due quickly after acceptance, sometimes within one to three business days. The specific escrow company or broker handling the transaction will usually provide instructions for wiring or depositing the funds. Buyers should be careful with wire fraud risks and always verify instructions directly before sending money.

If you’re exploring a California real estate license, learning how earnest money works is a useful foundation because it comes up often in client conversations and transaction management. A California pre-licensing course can help you build that practical knowledge along with the legal basics. If you’re ready to keep going, California real estate pre-licensing course is a solid next step.