What’s a Typical Earnest Money Deposit in the San Francisco Bay Area?

Bay Area home buyers typically use the earnest money deposit to show sellers they are serious about purchasing a property. Earnest money is one of several tools buyers can use to make their offers stand out in a competitive real estate market. Today, we’ll look at the typical earnest money deposit amount for the Bay Area.

But these are just average and median figures. They size of your earnest money deposit might fall above or below this range, for a variety of reasons.

What Is an Earnest Money Deposit?

In a related article, we explained the basic concept behind the earnest money deposit. The short version is that home buyers use these deposits to underscore their willingness to purchase a property. In other words, they do it to show sellers that they are serious buyers.

The earnest money deposit becomes even more important in a highly competitive real estate market.

When sellers receive multiple offers from competing buyers, they have the luxury of picking what they feel is the strongest offer. They might do this by considering the type of financing being used, the contingencies added to the contract, and also the size of the earnest money deposit.

With all other things being equal, a home buyer who makes a bigger earnest money deposit has a better chance of getting the seller’s attention. That makes it an important consideration in a hot housing market.

Which begs the question: What is the average or typical earnest money deposit amount in the San Francisco Bay Area, as of 2022? Let’s talk about that next…

How Much Do Bay Area Home Buyers Pay?

There is no rule or requirement that says how much home buyers should pay for an earnest money deposit. It usually depends on local real estate market customs and trends.

As a general rule, home buyers in the San Francisco Bay Area typically make earnest money deposits somewhere between 1% and 3% of the purchase price. But again, that’s not a hard-and-fast rule.

In the more competitive real estate markets, where sellers tend to receive multiple offers, buyers often make bigger deposits. They do this to stand out in a crowded marketplace.

So what does this translate to, in terms of real dollars? The earnest money deposit is related to the purchase price of the house. So a more expensive home will typically elicit a bigger deposit amount from buyers.

If we use the median home value for the Bay Area, we can get a sense of the average or typical earnest money deposit for the 1% to 3% range mentioned above.

As of March 2022, the median home value for the San Francisco-Oakland-Hayward metropolitan area was around $1,391,000. That’s based on data provided by Zillow. If we use the 1% to 3% deposit range, which is typical for home buyers, it would come out to the following:

• 1% = $13,910
• 2% = $27,820
• 3% = $41,730

As you can see, the typical earnest money deposit in the Bay Area can be a sizable amount of money. That’s because we live in one of the most expensive real estate markets in the nation. And pricier homes bring bigger deposit amounts. That’s just the reality of a housing market like the San Francisco Bay area.

Using Contingencies to Protect Your Deposit

The deposit range shown above underscores the risks associated with waiving contract contingencies. Home buyers can use real estate contingencies as a way to back out of the deal.

For instance, a mortgage financing contingency says that the buyer must be able to obtain financing in order for the deal to go through. If they’re unable to obtain financing, they can back out of the deal while retaining their earnest money deposit. But this only works when a contract contingency is used.

We just looked at how big the typical earnest money deposit can be within the Bay Area real estate market. That’s why it’s important to consider the risks associated with waiving contract contingencies.

Have Mortgage Questions That Need Answering?

Bridgepoint Funding has been helping Bay Area home buyers and homeowners with their mortgage needs for going on 20 years now. Our knowledgeable staff can answer any questions you have related to home financing.

As a broker-based mortgage company, we offer a broad range of home loan options to borrowers. This includes conventional, FHA, VA and jumbo financing.

Please contact our staff if you have mortgage-related questions or would like to apply for a loan. We can review your financial situation to determine how much you might be able to borrow. This is a good first step when entering a competitive real estate market like ours.