Finding Your Way in Florida Real Estate: A Complete Guide to How Much Earnest Money Is Required in Florida

Understanding how much earnest money is required in Florida is key to securing property in one of the top housing and commercial real estate markets in the United States.

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As a buyer and investor looking to get in on one of the hottest real estate markets in the United States, understanding how much earnest money is required in Florida, along with timeframes and best practices, is the linchpin of executing a successful and smooth property sale and handoff.  

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With its warm climate and high quality of life, strong environment for business, low taxes, robust economy, and location as a gateway to Latin America and the Caribbean, Florida is one of the most popular real estate markets in the United States (as of 2023). Indeed, two of the top five real estate markets in the US, as reported by CBS, are in Florida: They are (in order) Atlanta, Georgia; Knoxville, Tennessee; Fort Myers, Florida; Sarasota, Florida; and Charlotte, North Carolina.

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Today in the US people are increasingly moving away from pricier cities to more affordable areas with a better quality of life. It’s no surprise that Florida is a top choice. In fact, more people are moving to Florida than any other state, with Sarasota, Tampa, and Cape Coral listed as the top spots for relocation.

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Source: Redfin

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Besides the Sunshine State’s thriving housing market, the commercial market in Florida is also extremely attractive to buyers and investors—it’s driven by a strong economy, has a diverse population, and its proximity to Latin America and the Caribbean make it an ideal location for businesses looking to expand in those areas.

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Attractive commercial real estate market opportunities in Florida include office, retail, industrial, and hospitality properties. Miami, in particular, has become a bustling center for international business, with multinational companies taking notice of its strategic location and setting up operations in the city.

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In the study PWC Emerging Trends in Real Estate 2023, Tampa/St. Petersburg and Miami were ranked in the top 10 hottest real estate markets in the US.

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Miami, Florida

Source: Wikimedia Commons

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Despite a cooling in the national real estate markets, Florida remains red hot, with potential investors keen to invest in Florida’s thriving commercial real estate market, thanks to appealing factors like tax friendliness, population growth, low unemployment rate, fantastic infrastructure and connectivity, and enjoyable quality of life.

Source: MMG Equity Partners

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Now we are going to walk you through the process of earnest money deposits in Florida—we’ll talk about how much earnest money is required in Florida, as well as other earnest money questions you’ll probably need answers to.  

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To help you understand the process of earnest money in Florida, we’ve prepared this comprehensive guide, which will answer the following questions:

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1. What is earnest money?
2. Is earnest money the same as down payments and option fees?
3. Is earnest money required in Florida?
4. What percentage is usually needed for an earnest money deposit in Florida?
5. How much earnest money is normal in Florida?
6. Who holds the earnest money in Florida?
7. When should earnest money be paid in Florida?
8. How should earnest money be paid in Florida?
9. Is earnest money refundable in Florida?
10. What are some common situations of a sale falling through, and who gets to keep the earnest money?
11. How can earnest money in Florida be protected?

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1. What is earnest money?

Before we get into how much earnest money is required in Florida, let’s talk about earnest money’s role in a real estate transaction. Earnest money is a sum of money that buyers put up before a property's closing date to show the seller that they are committed to the sale. Earnest money payments are also known as a soft deposit or a good faith deposit.

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Paying earnest money in a Florida real estate transaction is a practice that shows the seller that the buyer is serious about the sale of the property.

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Dennis Bowers, a real estate agent with Compass in Naples, Florida, puts it simply—"It shows that you're real [and] you're not going to walk away [from the transaction]."

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If the buyer doesn't push through with the transaction and the deal falls through, the earnest money acts as compensation for the seller for their time and effort. In some cases, and depending on the contingencies the buyer and seller agreed on in the contract, earnest money can be refunded to the buyer. On the other hand, if the sale is successful, the earnest money contributes to the purchase price or covers closing costs.

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2. Is earnest money the same as down payments and option fees?

Earnest money, down payments, and option fees are all different payments with different roles and purposes in the sale process of residential and commercial real estate properties.

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Earnest money simply exists to convey to the seller that the buyer is “in earnest” and will see the sale through to the end.

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Option fees, or inspection fees, is a non-refundable payment (around $250-$400 in Florida, depending on the property’s purchase price) that allows the buyer to access the property during a period of between seven to 10 days. During this option period, the buyer can conduct their due diligence on the property—building and home inspections, like termite inspections and neighborhood checks.  

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If buyers pay the option fee, it gives them the right to terminate the contract before the option period is over, should they find something they don’t like about the property or if they change their minds.

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On the other hand, a down payment is a portion of a property’s purchase price that acts as assurance to the lender that the borrower will be able to pay their regular mortgage fees, helps the lender to reduce risk, and gives the borrower better loan terms.

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3. Is earnest money required in Florida?

Before we find out how much earnest money is required in Florida, it is worth understanding whether it’s required in the first place and its role in a potential sale.

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Earnest money is not required in Florida to make a real estate contract legal and binding, but it is an expected practice that can add value to an offer and show a buyer’s commitment to the purchase.

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In fact, some sellers look at a lack of earnest money deposit as “unfair,” says Margy Grant, COO & General Counsel of Florida Realtors, adding that “a seller may certainly insist on a deposit before agreeing to the contract.”

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Chris Stuart, president of PLACE, Inc., and former CEO of real estate brokerage franchise network Berkshire Hathaway Home Services, told U.S. News that “[earnest money] is not required; however, the absence of an earnest money deposit would indicate a lack of interest and motivation on the parts of the buyers. Regardless of the market—buyer's or seller's market—you should always have an earnest money deposit."

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4. What percentage is usually needed for an earnest money deposit in Florida?

In terms of how much earnest money is required in Florida, most realtors agree that it is normally between 1% and 3% of the property’s purchase price, though it can go as high as 10% in faster moving markets in the US.

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Speaking of hotter markets, in the luxury housing market of South Florida, larger earnest money deposits are necessary.

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"If you want your offer to be considered seriously, you need to put down 10% of the purchase price," Elena Bluntzer, a real estate agent for ONE Sotheby's International Realty in Coral Gables, Florida, told U.S. News,

5. How much earnest money is normal in Florida?

What is the right amount of earnest money that buyers should consider offering? In Florida, earnest money for commercial real estate can be anywhere from 1% and 3% in most cases, though sellers may ask for 5% to 10% (and even up to 15%) depending on how competitive the real estate market in the area is.

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According to The Investor’s Edge, earnest money on CRE properties normally amounts to around $5,000 to $10,000.  

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6. Who holds the earnest money in Florida?

In most cases in Florida and in many parts of the US, the listing agent will hold the earnest money in their escrow account until closing. If the sale doesn’t involve a real estate agent—meaning that it’s a For Sale By Owner (FSBO) sale, a title company or real estate attorney can be called upon to act as the escrow agent.

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A real estate lawyer is the better choice as they can take care of most closing services—such as contractual reviews—and have more knowledge than the title company when it comes to legal advice and protection.

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7. When should earnest money be paid in Florida?

Besides knowing how much earnest money is required in Florida, it’s vital to know when it needs to be paid. In Florida, earnest money is normally due by default within three days of being under contract but can be more or less depending on the specific sale and contract.

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For more luxury markets in Florida, Bowers suggests that it might be beneficial to provide earnest money in “two different escrow deposits,” adding that “a buyer could provide a smaller deposit within the initial three-day window…[and] the second earnest deposit is typically done after your due diligence period or any contingent period you have."

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8. How should earnest money be paid in Florida?

Along with how much earnest money is required in Florida, knowing the different payment methods for earnest money deposits is important. In Florida, earnest money deposits are commonly sent by wire transfer, but payment by check is also acceptable.

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In some US states, like Colorado, cash is no longer accepted as a form of earnest money payment, so check with a real estate agent or lawyer before you prepare your payment.

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9. Is earnest money refundable in Florida?

While the point of earnest money is to give the seller financial compensation for their time and effort if the buyer backs out, there are some scenarios in which earnest money in Florida can be refunded to the buyer.

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Contingencies and disclaimers—situations when earnest money can be refunded to the buyer—can be worked into the contract when making an offer and can be used to protect the buyer and their earnest money deposit. Appraisals, financials, and inspection contingencies are some examples of contingencies that can be included in the purchase agreement.

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10. What are some common situations of a sale falling through, and who gets to keep the earnest money?

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• Buyer or seller defaults on the contract: If either the buyer or the seller fails to comply with terms specified in the contract, the other party has the right to terminate the contract and keep the earnest money.

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• Issues with the title: The buyer has the right to object to and contest issues to do with the title and other documents, and the seller has 15 days to deal with and fix the issue. If the seller fails to sort out the objections within the time period, the contract is terminated and the earnest money is then refunded to the buyer.

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• Buyer backs out during option period: If the buyer paid an option fee to inspect the property prior to purchase, this gives them the right to back out of the contract within the option period and for any reason. In this case, the seller keeps the option fee and the earnest money is returned to the buyer.

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• Repairs mandated by lender: If the lender demands repairs on the property, neither the seller or the buyer is required to pay for them, and either party can cancel the contract. The earnest money is then refunded to the buyer.

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• Seller fails to complete agreed-upon repairs: If both the seller and the buyer agree on repairs, the seller is required to complete all repairs (and ensure that they are done by licensed contractors with appropriate state-issued permits). If they fail to do so, the buyer has a few options: they can extend the contract’s closing date or end the contract and get their earnest money deposit back.

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• Buyer’s financing does not go through: For contracts with a financing contingency, buyers can have their earnest money refunded if financing falls through. If the buyer chose to waive the contingency and their commercial or home loan does not go through, the earnest money is then forfeited to the seller.

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There are a number of obstacles that could impede the sale process, which can lead to earnest money disagreements. Having seasoned real estate lawyers on your side is crucial to keeping things on track and making sure all parties are protected.

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11. How can earnest money in Florida be protected?

There are several ways that prospective buyers can protect their earnest money deposits:

• Include financing, appraisals, and inspections contingencies in the purchase contract: Without proper contingencies written into in the contract, the seller gets to keep the earnest money if the buyer can't get financing
• Ensure contract terms (and all amendments) are in writing: The contract agreement, as well as any amendments between a buyer and seller, must be in writing and must be signed by both parties to be considered valid. It’s best to work with real estate lawyers who can advise on the process and take care of all the legalities.
• Understand and strictly follow the terms of the contract: The buyer should ensure that they read, comprehend, and abide by the terms of the contract. Failure to do so could result in forfeiting the earnest money deposit to the seller.
• Put the earnest money in an escrow account and get receipts: Earnest money is never paid directly to the seller but instead should be paid to an escrow firm who can hold and safeguard the funds until the transaction is complete or terminated. The buyer should make sure that they have the appropriate receipt for their earnest money deposit. Both buyers and sellers must have copies of the earnest money receipts.

Hiring a real estate lawyer to help you through the process of buying commercial real estate property in Florida is key to a smooth transaction. Interested developers, investors, and buyers can get in touch with the Florida Real Estate Commission for further guidance.

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Understanding how much earnest money is required in Florida, along with timelines and other steps of the earnest money process, is key to a smooth, successful real estate sale in one of the US’ most popular real estate markets.  

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