Earnest money in Georgia: how much, who holds it, and when the buyer gets it back

Earnest money is the deposit a buyer puts down after the contract goes binding to show the seller the offer is serious. In Georgia it is not set by law: the amount, who holds it, when it is due and when it comes back are all written in the purchase and sale agreement. In metro Atlanta, one percent of the price is a common starting point, and the deposit is credited to the buyer at closing.

How much earnest money is normal in Georgia

There is no legal minimum. On typical metro Atlanta homes we see deposits between 1% and 2% of the price; on competitive listings buyers sometimes offer more to stand out, and on new construction builders often set their own schedule. The deposit is not an extra cost: at closing it counts toward the buyer's down payment and closing costs.

Who holds it

The contract names a holder, usually the closing attorney's trust account or the listing brokerage's escrow account. The holder is neutral. Neither agent can release the money on their own; the contract and Georgia licensing rules govern when the holder can disburse.

When it has to be delivered

The GAR Purchase and Sale Agreement sets a number of days after the Binding Agreement Date for the buyer to deliver the funds, and a few banking days is typical. Deliver by wire when possible and send the confirmation to every party the same day. A late deposit gives the seller remedies under the contract, and in current forms that can include termination after notice.

When the buyer gets it back

The buyer recovers the deposit when the contract is terminated under a right the contract grants:

• During the due diligence period, for any reason or no reason, with written notice delivered before the period ends
• Under the financing contingency, with a lender's denial letter delivered inside the contingency period
• Under the appraisal contingency, when the property appraises low and the parties do not agree on a new price within the window
• If the seller defaults or cannot deliver clear title

Outside those rights, a buyer who walks away is in breach and the seller can claim the deposit as liquidated damages. That is the whole reason the dates matter.

When the seller keeps it

If the buyer terminates after due diligence with no contingency left to lean on, the contract typically lets the seller keep the earnest money as the agreed remedy. Disputes happen when both sides claim it; the holder can then follow the contract's disbursement procedure, and Georgia law allows the holder to interplead the funds into court if the parties cannot agree.

Three mistakes we see every month

• Counting the delivery deadline from the wrong date. Binding Agreement Date, not the date the buyer signed.
• A personal check that clears after the deadline. Wire it, or deliver early.
• Terminating by text message. Notice has to be delivered the way the contract says, in writing, before the period ends.

At THE LAB RE the earnest money confirmation is the first item on every transaction calendar, because it is the cheapest deadline to meet and the most expensive one to miss.

Questions agents ask

Can earnest money be zero? The contract can say so, but most sellers will not accept an offer without a deposit.

Is it the same as the down payment? No. It is an early piece of the money the buyer brings to closing, credited against the total.

Who decides a dispute? The holder follows the contract; if the parties still disagree, the courts. Agents cannot decide it.

This article is general information for real estate professionals, not legal advice. GAR forms: garealtor.com. Georgia Real Estate Commission trust account rules: grec.state.ga.us.