How much earnest money is typical on a land purchase?

Question

Turnrow Capital · Accepted Answer

On negotiated farmland sales, earnest money typically runs 1–5% of the purchase price — often a flat $10,000–$50,000 on mid-six-figure deals. Auctions are the exception: expect a hard 10% deposit on sale day, usually non-refundable.

Earnest money signals seriousness and compensates the seller for taking the property off the market. In a competitive situation, a larger deposit — 5% instead of 1% — is one of the cheapest ways to strengthen an offer, because you get it back at closing anyway if you perform.

What matters more than the amount is the refund language. Earnest money should be refundable if a stated contingency fails — title defect, water rights not as represented, financing denied — and forfeit only if you simply walk. Read the default clause: some contracts make the deposit liquidated damages, capping your downside; others leave the seller free to sue for more.

Always run the deposit through a title company or escrow agent, never directly to the seller. Recovering earnest money from a seller's personal account after a dispute is a lawsuit; recovering it from escrow is a form.