Making an Offer — Contingencies and Earnest Money, Explained

The short version: An offer isn't just a price — it's a price plus a set of conditions that protect you if something goes wrong before closing. Understanding those conditions matters as much as the number itself.

Earnest money — your "I'm serious" deposit

When you make an offer, you typically include an earnest money deposit — real money that shows you mean it. It doesn't go to the seller directly; it sits in escrow until closing (see our escrow guide for the full explanation of how that account works). At closing, it applies toward your down payment or closing costs. If the deal falls apart for a reason your contract covers, you generally get it back — which is exactly why contingencies matter so much.

Contingencies — the conditions that protect you

A contingency is a condition that must be met for the deal to move forward — and importantly, gives you a legitimate way out (with your earnest money back) if it isn't. The common ones:

• Inspection contingency — lets you walk away, or renegotiate, based on what an inspection turns up (see our inspection guide for what that actually covers).
• Financing contingency — protects you if your loan falls through despite a pre-approval, which does happen.
• Appraisal contingency — covers the low-appraisal scenario (see our appraisal guide) — without it, a low appraisal can leave you contractually obligated to cover the gap yourself.

The real tradeoff: fewer contingencies, more competitive offer

In a competitive market, buyers sometimes waive contingencies to make an offer more attractive to a seller comparing multiple bids. This can be a reasonable calculated risk in the right circumstances — but it's a real one, not a formality: waiving the inspection contingency means no legal way out (or earnest money back) if the inspection turns up something serious. Know exactly which protections you're giving up, and why, rather than waiving them just because of certain market conditions.

What to actually do

Talk through each contingency with your agent specifically — not just "the standard ones" — and understand exactly what happens to your earnest money in each walk-away scenario before you sign anything. An offer with the right contingencies for your actual risk tolerance is worth more than an offer that's simply the most aggressive on paper.