Buyer Advice
How Much Earnest Money Do You Need When Buying a House in Massachusetts?
There is no single statewide amount or percentage—but here’s what you need to know about how earnest money works in Massachusetts.
The Short Answer
How much earnest money do you need when buying a house in Massachusetts?
There is no single statewide earnest-money amount or percentage required for every Massachusetts home purchase. The deposit is a negotiable term of the transaction, and the amount, timing, escrow holder, and conditions for returning or releasing the money should be stated in the written offer and Purchase and Sale Agreement.
Massachusetts consumer guidance specifically confirms that buyers can negotiate the amount of a deposit.
Key Takeaways for Buyers
🤝It’s negotiable
There is no statewide requirement for a specific amount or percentage.
📄It’s part of the contract
The amount, timing, and terms should be clearly stated in the offer and P&S.
🔒It’s usually held in escrow
Typically held by a broker, attorney, or agreed escrow holder—not handed straight to the seller.
✅It counts toward your purchase
If the sale closes, the deposit is generally applied toward your down payment or closing costs.
What Is Earnest Money?
Earnest money is a deposit a buyer provides in connection with a signed agreement to purchase a home. In Massachusetts, you may simply hear this money called the:
- deposit
- offer deposit
- initial deposit
- additional deposit
- Purchase and Sale deposit
The terminology is less important than the actual contract.
Federal consumer guidance defines earnest money as a deposit a buyer pays to show good faith on a signed contract to buy a home. If the transaction closes, the deposit may be applied toward the buyer’s down payment or closing costs.
Is There a Required Earnest-Money Amount in Massachusetts?
No. Massachusetts does not establish one required deposit for every residential purchase.
The Massachusetts Board of Registration of Real Estate Brokers and Salespersons expressly tells consumers that they can negotiate the amount of any deposit.
That means buyers should not assume they must offer a particular dollar amount or percentage simply because they have heard that number used in another transaction. The deposit amount should be based on the actual offer being negotiated and reviewed together with the rest of the contract terms.
Can a Massachusetts Transaction Have More Than One Deposit?
Yes. A Massachusetts purchase can be structured with an initial deposit connected to the Offer to Purchase and an additional deposit when the Purchase and Sale Agreement is signed.
Massachusetts Purchase and Sale training materials specifically identify these as possible components of the purchase-price section:
- the amount of a previous deposit
- an amount paid when the P&S is signed
- the remaining balance due at closing
This structure is commonly encountered in Massachusetts forms, but it is not a mandatory statewide formula. Your own accepted offer and P&S determine what you actually owe and when.
What Is the Initial Deposit?
An initial deposit may accompany the Offer to Purchase or become due after the seller accepts it, depending on how the offer is written. The amount and due date should appear in the offer itself.
Massachusetts warns buyers that an offer is a legally binding contract and that an attorney should be consulted, so buyers should understand the terms—including the deposit and contingencies—before signing.
The deposit should not be treated as an informal placeholder. It is money being delivered under a contract.
What Is the Additional P&S Deposit?
A Purchase and Sale Agreement may require an additional deposit when the P&S is executed. The P&S generally addresses important terms such as:
- the purchase price
- deposits already paid
- any additional deposit
- financing
- title
- the closing date
- contingencies
- default provisions
- what happens to the deposit if a dispute occurs
Massachusetts identifies both the previous deposit and an additional amount payable at signing as customary subjects for a residential P&S. Again, however, the actual amount is negotiable.
Can You Use a Percentage to Calculate Your Deposit?
Only if that is what the buyer and seller agree to. There is no statewide rule requiring the deposit to equal a particular percentage of the home’s purchase price.
For example, imagine a buyer and seller agree in writing that the total deposits will be $20,000 on a $600,000 purchase:
$2,000with the accepted offer
+$18,000with the P&S
=$20,000total deposits
That is only a hypothetical illustration. It is not a recommendation or a Massachusetts standard. The contract—not a general rule of thumb—determines the required amount.
Is Earnest Money the Same as a Down Payment?
No. They are related but different.
Earnest money/deposit is money paid during the contract period and held according to the purchase agreement.
Down payment is the portion of the home price the buyer ultimately contributes rather than financing through the mortgage.
The CFPB notes that earnest money may ultimately be applied toward the buyer’s down payment or closing costs when the transaction closes.
So if you have already placed money into escrow, that deposit generally is not an unrelated extra charge on top of the purchase price. It is accounted for as part of the closing transaction.
Who Holds the Deposit?
The written agreement should identify who will hold the deposit. Depending on the transaction, that may be a real estate broker, attorney, or another agreed escrow holder.
If a Massachusetts real estate broker accepts a deposit, Board guidance says the broker must place it in an escrow account in a timely manner, where it stays until the transaction is completed or terminated.
The broker does not own those funds, and it is illegal for a broker to mix them with the broker’s own money. Salespersons have no authority or control over escrow funds; deposits they receive must go to their affiliated broker.
What Does Escrow Mean?
Escrow means funds are being held according to agreed instructions while the transaction is pending. Massachusetts guidance describes deposit money held in escrow until the transaction is completed or terminated, and the broker holding it does not own it.
This is why buyers should know:
Who is holding my money? • What written agreement governs it? • When can it be released?
Does the Seller Get the Deposit Immediately?
Not automatically. If the deposit is being held in escrow by a broker or another escrow holder, it remains subject to the contract and escrow instructions rather than simply becoming money the seller can freely spend.
For broker-held funds, the money stays in escrow until the transaction is completed or terminated. The actual agreement should identify how your particular deposit will be handled.
What Happens to the Deposit at Closing?
If the purchase closes, the deposit is generally credited as part of the buyer’s purchase transaction.
MassHousing explains that if the deal goes through, the deposit goes toward the down payment, and the CFPB notes it may be applied to the down payment or closing costs.
Your closing attorney and lender can show exactly how your deposit appears on the final closing documents.
Can You Get Your Deposit Back?
Sometimes. A deposit is not automatically refundable in every situation. Whether it is returned depends on:
- what the contract says
- why the transaction ends
- whether a contingency applies
- whether the buyer followed the required deadlines and notice procedures
- whether either party is in default
- the escrow provisions of the agreement
Massachusetts specifically tells consumers to be clear about what will happen to the deposit if there is a dispute and notes that deposit-dispute provisions can be negotiated.
What Happens After a Home Inspection?
An inspection finding by itself does not automatically mean the deposit must be returned. The buyer must look at the actual inspection language in the offer or P&S.
If the agreement gives the buyer a contractual right to terminate based on the inspection and the buyer properly exercises that right within the required deadline, the agreement may provide for return of the deposit. But the exact result depends on the contract.
Having the right to conduct an inspection and having the right to cancel and recover a deposit are related issues, but they are not automatically identical.
What If the Buyer Cannot Get a Mortgage?
That depends on whether the contract includes a financing or mortgage contingency and whether the buyer complies with it.
Massachusetts P&S guidance lists financing among the contingencies the parties may agree to include. MassHousing likewise advises buyers to include a mortgage contingency clause concerning their ability to obtain financing.
But buyers should not assume that a deposit will automatically be returned simply because financing becomes difficult. The buyer may have to:
- apply for financing as required
- act in good faith
- meet application requirements
- give notice by a specific deadline
- comply with the exact terms of the mortgage contingency
Missing a contractual deadline can affect the buyer’s rights.
What If the Buyer Simply Changes Their Mind?
That is different from terminating under a valid contingency.
The CFPB explains that if the contract ends for a permitted reason, the buyer gets the deposit back—but if the buyer does not act in good faith, the seller may keep it. Massachusetts P&S training materials also identify buyer default, liquidated damages, and other seller remedies as provisions commonly addressed by the agreement.
Do not assume: “If I decide I no longer want the home, I will automatically get my deposit back.”
The contract determines the consequences.
Can a Buyer Lose the Entire Deposit?
Potentially. Some Purchase and Sale Agreements contain a liquidated-damages provision stating what happens to the deposit if the buyer defaults. Other agreements may provide different seller remedies.
Massachusetts specifically recognizes both liquidated damages and other remedies as subjects that can appear in a P&S. That is why the default section deserves careful attorney review.
The fact that money is being held in escrow does not mean it can never be forfeited. It means the money must be handled according to the parties’ contractual rights.
What If the Buyer and Seller Both Claim the Deposit?
The escrow holder should not simply decide which side deserves the money based on personal judgment. Massachusetts advises buyers and sellers to be clear in writing about what will happen if there is a deposit dispute.
For example, MassHousing’s sample Offer to Purchase provides that, if the parties disagree over who should receive the escrowed funds, the escrow agent may retain the deposit pending mutually signed written instructions or a court decision.
That is an example of one contractual approach, not a rule governing every transaction. Your actual escrow clause controls.
Should You Offer a Larger Deposit to Make Your Offer Stronger?
A buyer can propose a larger deposit if they choose. Whether that makes an offer more attractive to a particular seller is a negotiation question, not a legal rule.
A larger deposit also means more of the buyer’s money is committed earlier in the transaction and potentially subject to the contract’s default and dispute provisions. Before increasing the deposit simply to make an offer appear stronger, understand:
- what contingencies protect you
- when they expire
- whether the deposit can become liquidated damages
- what happens if there is a dispute
- how much cash you still need for closing
More deposit money is not automatically better if the buyer does not understand the risk attached to it.
Does a Larger Deposit Reduce the Purchase Price?
No. The deposit is part of how the purchase price is funded; it does not by itself lower the agreed purchase price.
If two buyers both offer $700,000 but propose different deposits, the purchase price remains $700,000 unless the parties negotiate a different price. What changes is how much money the buyer places into the transaction before closing.
Will Your Mortgage Lender Ask About the Deposit?
Usually, the lender needs documentation of funds used in the purchase. Your deposit is reflected in your closing figures, and lenders may need to verify the buyer’s assets and source of funds. Keep records of:
- deposit checks
- wire confirmations
- bank statements
- escrow receipts
- transfers between your own accounts
If you are receiving gifted funds or moving significant amounts of money, ask your lender what documentation is required before making the transfer.
How Much Cash Should You Have Ready Before Making an Offer?
Buyers should plan for more than the final down payment. Depending on the transaction, money may be needed for:
- the contract deposit
- home inspection
- specialized inspections
- attorney fees
- appraisal or lender costs
- closing costs
- insurance
- prepaid taxes or escrow items
- moving expenses
- the remaining cash due at closing
The deposit generally goes toward the purchase if the transaction closes, but the buyer may need to make that money available well before closing day. That timing is important when deciding how much cash to keep accessible.
What Should Buyers Confirm Before Sending a Deposit?
Before sending money, confirm the actual written agreement answers these questions:
- How much is the deposit?
- When is it due?
- Who is the escrow holder?
- How must the money be delivered?
- What contingencies apply?
- When do those contingencies expire?
- What happens if the buyer terminates properly?
- What happens if the buyer defaults?
- What happens if the buyer and seller dispute the money?
Massachusetts advises that no party should sign an agreement or pay any money until they understand the terms.
⚠ Be Extremely Careful With Wire Instructions
Real estate transactions are frequent targets for business-email-compromise and wire fraud. The FBI specifically describes a scheme in which a homebuyer receives a message that appears to come from their title company with instructions on how to wire their down payment—to a criminal-controlled account.
Before sending deposit or closing funds:
Independently verify wire instructions by calling a phone number you look up on your own—not a new phone number included in an unexpected email.
Be especially cautious about any change in account numbers or payment procedures, and about requests pressing you to act quickly. The FBI recommends verifying payment requests by phone with the person making them.
Common Questions About Earnest Money in Massachusetts
No. Massachusetts does not impose one fixed deposit amount for every residential transaction. Deposit amounts are negotiable.
No. Massachusetts materials recognize a structure with a previous deposit and an additional deposit at the P&S stage, but the actual structure depends on the agreement.
No statewide percentage applies to every transaction. The buyer and seller negotiate the amount.
No. Earnest money is a contract deposit paid during the transaction. The down payment is the buyer’s overall equity contribution to the purchase. If the transaction closes, the deposit may be credited toward the amounts the buyer owes at closing.
Not necessarily. The contract should identify the deposit holder. If a Massachusetts broker accepts the deposit, the broker must place it in an escrow account, where it stays until the transaction is completed or terminated.
Yes, potentially. If the buyer defaults or fails to satisfy contractual requirements, the P&S may provide for loss of the deposit or other remedies. The specific agreement determines the consequences.
No. The answer depends on whether the contract contains an applicable financing contingency and whether the buyer complied with its terms and deadlines.
No. The inspection contingency and termination provisions determine the buyer’s rights.
The contract’s escrow-dispute provisions govern. The deposit may remain held while the dispute is resolved rather than being immediately released to either side.
Final Takeaway
There is no universal Massachusetts earnest-money amount or percentage that every buyer must provide.
The deposit is negotiated as part of the offer and Purchase and Sale Agreement. A transaction may use an initial deposit followed by an additional deposit at the P&S stage, but the amount and structure should come from the actual contract—not from a general rule of thumb.
For buyers, the most important question is not simply “How much earnest money do I need?” It is:
“How much have I agreed to deposit, when is it due, who is holding it, what contingencies protect me, and under what circumstances could the money be released or forfeited?”
Understanding those answers before signing an offer is far more important than trying to match a supposed statewide “standard.”
Thinking About Buying a Home in Massachusetts or on Cape Cod?
If you’re preparing to make an offer, Nancy can help you understand the transaction timeline, identify important deposit deadlines, and coordinate with your attorney and lender so you know what to expect before committing funds.
Search available properties at www.newhomema.com or contact Nancy at 508.954.3420.
Nancy Cassano | Realtor | Serving Greater Boston & Cape Cod
Phone: 508.954.3420
Email: nancyc@todayrealestate.com
Website: www.newhomema.com
Official Sources & Verification
This article reflects guidance reviewed in October 2026 and is intended for general real estate information only. Deposit amounts, contingencies, escrow arrangements, default provisions, and refund rights depend on the particular contract and transaction. Buyers and sellers should have their specific agreements reviewed by a qualified Massachusetts real estate attorney.
Primary sources reviewed include the Massachusetts Board of Registration of Real Estate Brokers and Salespersons consumer guidance on deposits and escrow accounts, Massachusetts Purchase and Sale Agreement training materials, the Massachusetts homebuying guide, MassHousing homebuyer materials, Consumer Financial Protection Bureau guidance on earnest money, and FBI guidance concerning real-estate wire fraud.