What Homebuyers Need to Know About Earnest Money in Tennessee & Georgia

Real Talk from Hanson Capital Homes

💰 Introduction: Show Me the Money—But Not All of It Yet

You’ve found the dream home. You're ready to make an offer. Then your real estate agent asks:

“How much do you want to put down as earnest money?”

Wait… what is earnest money again? Is it part of the down payment? Is it refundable? Can you lose it? Do you even need it in Tennessee or Georgia?

Whether you're a first-time buyer or just need a refresher, this guide will break it all down—no confusing legal jargon, just honest answers from your local experts at Hanson Capital Homes.

🤔 What Is Earnest Money?

Earnest money is like a “good faith deposit.” It shows the seller you're serious about buying the home and are not just casually browsing or likely to back out.

In most transactions across Tennessee and Georgia, earnest money ranges from 1% to 2% of the purchase price—but this can vary depending on how competitive the market is.

💡 Think of it like this: It's not a fee. It's a credit toward your final closing costs or down payment.

💸 How Much Earnest Money Should You Offer?

There’s no universal number, but here’s a helpful breakdown:

Purchase Price Typical Earnest Money

$200,000 $2,000 – $4,000

$350,000 $3,500 – $7,000

$500,000+ $5,000 – $10,000+

In hot markets like Chattanooga Valley, Ooltewah, and Ringgold, a strong earnest money deposit can make your offer stand out.

🎯 Hanson Tip: If you’re up against multiple offers, consider going a little above the norm—but don’t stretch beyond your comfort zone.

📍 State Differences: Tennessee vs. Georgia

Both states follow similar earnest money practices, but here's what to keep in mind:

Tennessee:

• Earnest money is often held by the listing brokerage or closing attorney.
  
  

• Refund timelines and conditions must be clearly stated in the contract.
  
  

• TN buyers typically have an Inspection Period (due diligence), and earnest money is often refundable if you cancel within that time.
  
  

Georgia:

• Funds are usually held by the buyer’s agent’s brokerage or closing attorney.
  
  

• GA uses “Binding Agreement Date” as the start of timelines, which impacts earnest money deadlines.
  
  

• Similar to TN, it’s usually refundable within due diligence, but terms must be followed strictly.
  
  

🧾 Always double-check who holds the earnest money, how it’s deposited (check, wire, or online), and when it’s due—usually within 1–5 business days after binding.

🚩 Can You Lose Your Earnest Money?

Yes—and here’s how:

• You miss your due diligence deadline and back out after
  
  

• You fail to secure financing and the contract isn’t contingent on loan approval
  
  

• You simply change your mind after going under contract
  
  

• You fail to show up to closing with no legal excuse
  
  

💡 Pro Insight: This is why having a strong contract and a detail-oriented agent (hi, that’s us at Hanson Capital Homes) matters. We keep your timelines tight and your money protected.

💡 Featured Snippet: When Is Earnest Money Refundable?

Earnest money is typically refundable when:

1. You cancel within the due diligence or inspection period
   
   

2. The home doesn’t appraise and the contract is contingent on appraisal
   
   

3. You’re denied financing and have a financing contingency
   
   

4. The seller breaches the contract
   
   

BUT—if you cancel without a valid reason after contingencies expire, the seller may keep it.

🏦 Where Does the Money Go?

It’s usually held in an escrow account—a neutral third party like a brokerage, title company, or attorney keeps the money until closing.

At closing, the earnest money gets applied to your down payment or closing costs.
If the deal falls through, whether you get it back depends on your contract terms.

🙋‍♀️ Common Buyer Questions (and Honest Answers)

Q: Can I use a credit card for earnest money?

A: Not usually. Most brokers or attorneys require a personal check, wire, or ACH deposit.

Q: Do I need a receipt?

A: Absolutely. You should always receive a signed receipt—we handle this for you at Hanson Capital Homes.

Q: What happens if the seller never signs the contract?

A: No deal = no binding contract = you get your money back.

Q: Can I offer more earnest money to win a bidding war?

A: Yes! A strong earnest deposit can signal to the seller that you're solid and serious.

🧠 Real Talk: Don’t Confuse Earnest Money With…

Term What It Means

Down Payment % of home price you pay upfront—due at closing

Option Fee (GA only) Fee for a short, unrestricted due diligence window

Closing Costs Lender/title/attorney/insurance fees due at closing

Escrow Holdback Funds withheld for specific repairs or delayed items

✅ Conclusion: It’s Not Just a Deposit—It’s a Promise

Earnest money is more than a check—it’s your first commitment to the home you're buying. But like everything in real estate, it’s all about timing, paperwork, and smart negotiation.

At Hanson Capital Homes, we’re here to walk you through the fine print and make sure you never risk more than you should.

🎯 Want help navigating earnest money deposits, contracts, and contingencies like a pro? Click here!