In California, earnest money is typically 1% to 3% of the purchase price, deposited directly into escrow within 3 business days of acceptance. On a $900,000 home, that’s $9,000 to $27,000 that goes into escrow before you’ve done a single inspection. If you cancel within a contingency period, you get every dollar back. If you remove your contingencies and then walk away, you can lose it. Understanding exactly where that line is protects you through the whole transaction.
By Austin Criss, REALTOR® | RE/MAX TIFFANY | June 22, 2026
Questions? Call or text me at 714.600.1176. Always Ask Austin.
What Earnest Money Actually Is
Earnest money is a good faith deposit that demonstrates a buyer is serious about purchasing a home. In California, it is delivered directly to the escrow holder — not to the seller — and held in a neutral account until closing. At close, the earnest money is credited toward your down payment and closing costs. It is not an extra payment; it’s a portion of what you were already going to bring to the table.
The California Residential Purchase Agreement (RPA) governs how earnest money works in most California transactions. The default method of delivery is wire transfer, due within 3 business days of acceptance. Your agent can negotiate a different method or timeline in the offer, but wire is standard in Orange County.
How Much Earnest Money in Orange County
In most OC markets, 1% is the floor and 3% is common in competitive multiple-offer situations. On a $900,000 home in Buena Park or Cypress, here’s what that looks like:
- 1% deposit: $9,000
- 2% deposit: $18,000
- 3% deposit: $27,000
A higher deposit signals commitment and can make your offer stand out when price and terms are otherwise similar to competing offers. I advise most of my buyers to put at least 2% to 3% in competitive situations — not because you’re at greater risk of losing it, but because a stronger deposit tells the seller you’re serious and financially capable.
That said, a higher deposit is not always necessary. In a slower market or when you’re the only offer, 1% often works. The right number depends on the specific situation, and I’ll always tell you what makes sense before you submit.
When You Get Your Earnest Money Back
This is the most important thing to understand. Your earnest money is protected by contingency periods built into the RPA. As long as you cancel for a covered reason before the contingency deadline, you are entitled to a full refund — no questions asked, no negotiation required.
The default contingency timelines under the California Residential Purchase Agreement are 17 days after acceptance for:
- Loan contingency — if you can’t get your loan approved, you cancel and get your deposit back
- Appraisal contingency — if the home appraises below the purchase price, you can cancel and get your deposit back (or renegotiate)
- Investigation of property contingency — if inspections reveal issues that are unacceptable to you, you can cancel and get your deposit back
If you cancel within those 17 days for a contingency-covered reason and the seller tries to hold your deposit, they generally cannot. The escrow company holds the money in trust and requires mutual written consent — or a court order — to release it to either party if there’s a dispute.
When You Can Lose Your Earnest Money
The risk comes when you remove your contingencies. Once you sign a Contingency Removal form and your agent delivers it, your protections for those contingencies are gone. If you then try to cancel the contract without a legitimate contractual basis, the seller can claim your deposit as liquidated damages.
In California, liquidated damages for residential 1-4 unit purchases are capped at 3% of the purchase price, provided both parties initialed the liquidated damages clause in the RPA — which they almost always do. On a $900,000 home, that cap is $27,000. If your deposit was $18,000 and the cap is $27,000, the seller can only keep the $18,000 you deposited, not demand the additional $9,000 unless there’s a separate agreement.
Common ways buyers lose earnest money: removing contingencies and then getting cold feet, being unable to perform after a voluntary contingency removal, or failing to close because of issues that were known before contingencies were removed.
What Happens If the Seller Can’t Perform
Earnest money disputes aren’t only about buyers backing out. If the seller fails to perform — for instance, if they can’t deliver clear title, refuse to make required repairs they agreed to, or back out of the deal — you’re entitled to your full deposit back plus potential additional remedies. The seller is not shielded by liquidated damages the same way the buyer is under California law.
The Contingency Removal and NBP Process
One detail buyers often miss: if your contingency deadline passes and you haven’t removed it or cancelled, the seller can’t immediately cancel either. Under the RPA, the seller must first deliver a Notice to Buyer to Perform (NBP), which gives you at least 2 calendar days to respond. Only after that window expires without action can the seller cancel. This gives buyers a brief safety buffer, but it’s not a strategy — it’s a procedural protection, not an extension of your rights.
I walk every buyer I work with through the contingency timeline before we go under contract. The goal is that you always know where you stand: protected or not, and by what.
Frequently Asked Questions
How much earnest money is typical in California?
In Orange County, 1% to 3% of the purchase price is standard. On a $900,000 home, that’s $9,000 to $27,000 deposited into escrow within 3 business days of acceptance. In competitive situations, 2% to 3% is common and strengthens your offer positioning.
Is the earnest money deposit refundable in California?
Yes, if you cancel within an active contingency. The default RPA contingency periods are 17 days for inspection, appraisal, and financing. Cancel for a covered reason before those deadlines and your full deposit is returned. Cancel after removing contingencies without a contractual basis, and the seller can keep it up to the liquidated damages cap.
How much can a seller keep if a buyer backs out?
In California, liquidated damages are capped at 3% of the purchase price for residential 1-4 unit properties, but only if both parties initialed the clause in the contract. On a $900,000 home, the maximum is $27,000, regardless of how much the deposit was. The seller cannot seek additional damages if the liquidated damages clause applies and was properly executed.
When is earnest money deposited in California?
Under the default RPA terms, it goes to the escrow company via wire transfer within 3 business days of acceptance. The specific terms can be modified in the offer. The deposit is credited toward your closing costs and down payment when you close — it’s not an additional expense.
Can a seller cancel if a buyer misses the contingency deadline?
Not immediately. The seller must first deliver a Notice to Buyer to Perform (NBP), giving the buyer at least 2 calendar days to respond. Only after the NBP window closes without action from the buyer can the seller legally cancel the contract.
Questions About Your Deposit or Where You Stand?
I walk every buyer through the contingency timeline before we go under contract in Cypress, Buena Park, and Anaheim. Let’s make sure you know exactly where your money is protected — before you sign anything.
714.600.1176 — Always Ask Austin.
About Austin Criss
Austin Criss is a REALTOR® with RE/MAX TIFFANY serving Cypress, Buena Park, and Orange County, California. He specializes in helping first-time buyers and move-up sellers navigate the process from first question to closing. Call or text him at 714.600.1176, or visit austincriss.com.