What Is Earnest Money and How Much Should West Covina Buyers Put Down?

If you are preparing to submit an offer on a home in West Covina, one of the first questions you will encounter is: How much earnest money deposit (EMD) should I put down?

In the eastern San Gabriel Valley real estate market, earnest money deposits typically range between 1% and 3% of the total purchase price. On an $800,000 West Covina home, that represents a deposit of $8,000 to $24,000.

Here is a clear breakdown of how earnest money works under California Association of REALTORS® (C.A.R.) purchase agreements, how your deposit is protected during escrow, and how to avoid costly buyer mistakes.

What Is Earnest Money in California Real Estate?

Earnest money—often called an Earnest Money Deposit (EMD)—is a good-faith financial commitment submitted shortly after your purchase offer is accepted.

• It Is NOT an Extra Fee: Your earnest money deposit is credited 100% toward your down payment and closing costs at the close of escrow.

• Escrow Protection: The deposit is held safely in a neutral third-party escrow company account—it is never paid directly to the seller during escrow.

How Much Earnest Money Should You Put Down in West Covina?

How Contingencies Protect Your Earnest Money Deposit

California purchase contracts include built-in contingency periods that protect your deposit while you conduct due diligence:

1. Inspection Contingency: Allows you to conduct physical home inspections. If major unaddressed defects are uncovered, you can cancel and receive a full deposit refund.

2. Appraisal Contingency: Protects your deposit if the bank appraisal comes in lower than the agreed purchase price and the seller refuses to renegotiate.

3. Loan Contingency: Ensures your deposit is refunded if your mortgage lender fails to issue final loan approval within the contractual timeframe.

Crucial Rule: Your deposit is protected as long as you act within contractual contingency deadlines. If you unilaterally cancel escrow after waiving all contingencies, the seller may claim the deposit as liquidated damages under C.A.R. guidelines.

Frequently Asked Questions

Is earnest money separate from my down payment in California?

No. Your earnest money deposit is applied directly toward your required down payment and closing costs at the close of escrow.

How quickly must earnest money be delivered in West Covina?

Under standard California purchase agreements, the buyer must wire the earnest money deposit to the neutral escrow company within 3 business days of offer acceptance.

What happens if the appraisal comes in low on a West Covina home purchase?

If you have an active appraisal contingency and the home appraises below the purchase price, you can negotiate a price reduction, bring extra cash, or cancel the contract and receive 100% of your earnest money back.

Ready to Buy a Home in West Covina?

Let’s navigate the home buying process together with clear, contract-level guidance every step of the way.

Edgar Cuevas
Broker & Owner | Xprt Real Estate
Specializing in West Covina, Whittier, Hacienda Heights, La Puente, Valinda, Santa Fe Springs, Pico Rivera & Norwalk

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