How Earnest Money Works in Idaho Real Estate

What Is Earnest Money?

Earnest money — also called a good faith deposit — is money a buyer puts down when making an offer on a home. It signals to the seller that the buyer is serious. In Idaho, earnest money is standard practice in virtually every residential real estate transaction.

The deposit is not an additional cost — it’s applied to your closing costs or down payment at settlement. Think of it as paying part of your costs early to secure the deal.

How Much Earnest Money Is Typical in Idaho?

In most Idaho markets, earnest money ranges from 1% to 3% of the purchase price. On a $400,000 home, that’s $4,000 to $12,000. In competitive markets like Boise’s Ada County, buyers sometimes offer more to strengthen their position. In slower markets, 1% is common.

There is no state law requiring a specific amount — it’s determined by negotiation and local custom.

Who Holds Earnest Money in Idaho?

In Idaho, earnest money is held by the title company serving as the escrow agent. The funds are deposited into a trust account that is legally separate from the company’s operating funds. This protects the buyer’s deposit regardless of what happens to the title company’s business.

Idaho title companies are regulated under IDAPA 18.05.01, which governs how escrow agents handle funds. The deposit is typically due within 3 to 5 business days of the accepted offer.

When Do You Get Earnest Money Back?

Earnest money is refundable if the deal falls through under a valid contingency in the purchase agreement. Common contingencies in Idaho include:

Financing contingency: Buyer’s loan is denied.

Inspection contingency: Major defects discovered that can’t be resolved.

Appraisal contingency: Property appraises below the purchase price and parties can’t agree on terms.

Title contingency: Title search reveals defects that can’t be cleared.

If the buyer defaults without a valid contingency — for example, simply changing their mind — the seller may be entitled to keep the earnest money as liquidated damages per the terms of the purchase agreement.

What Happens to Earnest Money at Closing?

At closing, the earnest money is credited to the buyer. It’s applied to closing costs and/or the down payment, reducing the amount the buyer needs to bring to the closing table. The escrow officer accounts for it on the closing disclosure.

Recording fees at closing are $15 for the deed and $45 for the mortgage (Idaho Code § 31-3205) — these are among the costs your earnest money can be applied toward.

Earnest Money Disputes

If buyer and seller disagree about who should receive the earnest money after a failed transaction, the title company cannot release the funds without both parties’ written agreement or a court order. Idaho law requires the escrow agent to hold disputed funds until the dispute is resolved. This is one reason clear contingency language in the purchase agreement is critical.