What Is Earnest Money, and Can You Get It Back?

 Posted on July 14, 2026 in Residential Real Estate

Earnest money is a deposit a buyer pays when they make an offer on a home to show the seller they are serious about the purchase. It is not a fee that disappears. It goes toward the purchase price at closing. But if the deal falls apart, what happens to that money depends on why the transaction did not go through and what the purchase contract says. In some situations, you can get it back. In others, you cannot.

If you are buying or selling a home in 2026 and have questions about earnest money, a DuPage County real estate lawyer at The McCormick Law Firm, LLC can help you understand your rights before you sign anything.

How Much Is Earnest Money and Who Holds It?

There is no fixed amount required for earnest money in Illinois. It is typically between one and three percent of the purchase price, though it can be higher or lower depending on the market and what the parties agree to. On a $300,000 home, that might be anywhere from $3,000 to $9,000.

The earnest money is not given directly to the seller. It is held in escrow by a neutral third party, usually the title company or the real estate brokerage involved in the transaction. It stays there until closing, at which point it is applied toward the buyer's down payment or closing costs. If the deal falls apart, the escrow holder distributes the money according to the terms of the contract and any applicable law.

When Can a Buyer Get Their Earnest Money Back?

Whether a buyer can get their earnest money back depends almost entirely on the contingencies written into the purchase contract. A contingency is a condition that must be met for the sale to move forward. If the condition is not met, the buyer generally has the right to cancel the contract and get their deposit back.

Common contingencies that protect a buyer's earnest money include:

• A financing contingency, which allows the buyer to back out if their mortgage loan is not approved
• A home inspection contingency, which gives the buyer the right to cancel or renegotiate if the inspection reveals serious problems
• An appraisal contingency, which protects the buyer if the home appraises for less than the purchase price
• A sale contingency, which allows the buyer to cancel if they cannot sell their current home first

If one of these contingencies is triggered and the buyer properly exercises their right to cancel within the timeframe set out in the contract, the earnest money should be returned.

When Can a Seller Keep the Earnest Money?

If a buyer backs out of a deal without a valid contractual reason, the seller may have the right to keep the earnest money. This is called a forfeiture of the deposit, and it is one of the main ways sellers protect themselves when a buyer walks away without cause.

For example, if a buyer simply changes their mind after all contingencies have been removed and no longer wants to purchase the home, the seller can typically claim the earnest money as compensation for taking the property off the market. The same applies if the buyer misses key deadlines in the contract or fails to perform their obligations without a valid excuse.

Under the Illinois Residential Real Estate License Act, 225 ILCS 454/, licensed real estate professionals are required to handle earnest money in accordance with the terms of the contract and applicable law. Disputes over who is entitled to the earnest money are common, and having a clear contract is the best way to avoid them.

What Happens if the Buyer and Seller Disagree About the Earnest Money?

In Illinois, an escrow holder generally cannot release disputed earnest money without written agreement from both parties or a court order. This means the money can sit in escrow for a long time while the dispute plays out. Both parties may need to negotiate a resolution or pursue legal action to resolve the dispute.

The best way to avoid this situation is to have a clearly written purchase contract that spells out exactly what happens to the earnest money under every possible scenario. An attorney can review the contract before you sign it and flag any ambiguous language that could cause problems later.

Schedule a Free Consultation With Our Lisle, IL Residential Real Estate Attorney

Having the right legal guidance from the very beginning makes a real difference. Attorney Eron McCormick takes a straightforward, easy-to-understand approach to real estate law. He works directly with you so you always know where your case stands and never feel like just another file on a desk. He also offers discounts for military members, veterans, and first responders as a way of giving back to those who serve.

Contact the DuPage County real estate lawyer at The McCormick Law Firm, LLC today. Call 630-517-8570 to schedule your free consultation.