Utah Earnest Money: How Much to Ask For

Earnest money is one of the first financial commitments buyers make when purchasing a home in Utah. As a FSBO (For Sale By Owner) seller, understanding earnest money—how much to ask for, when to collect it, and what happens to it—is crucial to protecting yourself during the sale process.

Photo by Alexander Grey on Unsplash

What Is Earnest Money?

Earnest money is a deposit that a buyer provides to show they're serious about purchasing your home. It's held in escrow by a neutral third party (usually a title company or real estate attorney in Utah) and goes toward the purchase price at closing. If the sale closes, the earnest money is applied to the buyer's down payment or closing costs.

In Utah, earnest money is typically required before or shortly after the REPC (Real Estate Purchase Contract) is signed. It signals to you that the buyer has genuine intent to follow through with the purchase.

Why Earnest Money Matters for FSBO Sellers

As a FSBO seller in Utah, earnest money protects you in several ways:

Shows buyer commitment: A substantial earnest money deposit indicates the buyer is financially serious and less likely to back out frivolously.

Financial recourse: If a buyer breaches the contract without valid cause, you may be entitled to keep the earnest money as liquidated damages.

Reduces tire-kickers: Serious buyers put down earnest money; casual lookers won't. This helps you focus on committed purchasers.

Demonstrates solvency: The earnest money requirement confirms the buyer has access to funds and financial capability.

How Much Earnest Money to Ask For in Utah

Earnest money amounts in Utah typically range from 1% to 3% of the purchase price, though this can vary. Here's how to think about it by price point:

For homes under $300,000:

• Standard: 1.5% to 2%
• Example: On a $250,000 home, ask for $3,750 to $5,000

For homes $300,000 to $500,000:

• Standard: 2% to 2.5%
• Example: On a $400,000 home, ask for $8,000 to $10,000

For homes over $500,000:

• Standard: 1% to 2% (percentage often decreases at higher price points)
• Example: On a $600,000 home, ask for $6,000 to $12,000

The exact amount depends on several Utah-specific factors:

Local market conditions: In hot Utah markets like Lehi or Draper, you can typically ask for higher earnest money. In slower markets like rural Utah counties, buyers may balk at higher amounts.

Condition of the home: Homes in excellent condition can command higher earnest money percentages because the buyer is making a more confident commitment.

Buyer profile: If the buyer is pre-approved and putting down a substantial down payment, they may willingly deposit higher earnest money.

Contract contingencies: Fewer contingencies often justify higher earnest money because the buyer is taking less risk.

Earnest Money vs. Down Payment

Don't confuse earnest money with the down payment. Here's the difference:

Earnest Money:

• Paid early (before or shortly after signing REPC)
• Held in escrow
• Applied to the purchase price at closing
• Amount: 1–3% of purchase price
• Returnable if contingencies aren't met (inspections, appraisal, etc.)

Down Payment:

• Paid at closing
• Represents buyer's equity in the home
• Amount: typically 5–20%
• Non-refundable after closing (except in very limited circumstances)

In Utah, a buyer might put down $5,000 in earnest money on a $250,000 home but still have a 10% ($25,000) down payment due at closing.

When Does the Buyer Get Earnest Money Back?

As a FSBO seller, it's important to understand when earnest money is refundable:

Earnest money is typically returned to the buyer if:

• The home fails inspection (unless buyer waives inspection contingency)
• The appraisal comes in lower than the purchase price and buyer can't renegotiate
• Financing falls through (buyer can't secure a mortgage)
• Title issues are discovered that buyer won't accept
• Buyer exercises contingencies outlined in the REPC

Earnest money is forfeited to the seller if:

• Buyer breaches the contract without valid cause
• Buyer fails to perform required actions (like securing financing) due to their own fault
• Buyer walks away without legitimate contingency reasons

In Utah, earnest money disputes are handled according to the REPC contract language and sometimes require mediation or legal action.

How to Collect Earnest Money

For FSBO sales in Utah, earnest money should be:

1. Specified in the REPC: The amount must be clearly stated in the Real Estate Purchase Contract.
2. Held in escrow: Direct the funds to a title company or escrow agent, never to you personally. This protects both you and the buyer.
3. Due within a specified timeframe: Typically 1–3 days after REPC signing, though this is negotiable.

Common title companies in Utah that handle earnest money escrow include First Title, Ticor Title, and Stewart Title. As a FSBO seller, you can specify which title company you prefer, or let the buyer choose if they have a preference.

Red Flags with Earnest Money

Watch out for these red flags when dealing with earnest money as a FSBO seller:

• Buyer asks you to hold earnest money personally — Refuse. Always use a title company or escrow agent.
• Unusually low earnest money — May indicate buyer isn't serious or is unprepared financially.
• Unusually high earnest money — Ask questions. Sometimes scammers overpay to request refunds or create confusion.
• Delays in earnest money deposit — May indicate financing problems. Stay alert.
• Buyer requests earnest money returned early — Typically not permitted unless contingencies fail or the contract is terminated per the REPC terms.

Ready to Get Started?

Understanding earnest money protects you as a FSBO seller in Utah and sets the tone for a professional transaction. If you have questions about how to fill out your Utah REPC or need guidance on Utah real estate laws, schedule a free 15-minute consultation at utahfsbohelp.com/contact — Tyler offers expert guidance for Utah FSBO sellers.