Earnest money on a new-construction home usually runs between 1% and 10% of the base price, with the exact figure driven by the builder’s business model, the local market, and how customized the house will be. On a $400,000 home, that spread covers everything from a $4,000 deposit at a high-volume tract builder to $40,000 or more on a custom build. Some production builders skip percentages entirely and charge a flat fee, often somewhere between $500 and $5,000.
Typical Ranges by Builder Type
Production and tract builders generally ask for 1% to 5% of the base price. On a $450,000 home that works out to $4,500 to $22,500. These builders sell high volumes of standardized floor plans, so a canceled contract is easier to absorb and the deposit requirement reflects that lower risk.
Flat-fee deposits are common in large planned communities. The builder charges a fixed amount — often $500 to $5,000 — to cover the administrative cost of drafting the contract and holding the lot while you move through financing and selections. Floor plans are standardized, so reselling a canceled lot carries minimal loss.
Custom and semi-custom builders typically require more, sometimes up to 10%. They absorb greater upfront costs for design, engineering, and permitting that are tied to one buyer and don’t transfer easily to another. Luxury and fully custom builds frequently involve five- or six-figure deposits, and the percentage can climb above 5% when the builder is sourcing specialty materials or making structural changes that only make sense for your household.
What Pushes Your Number Up or Down
Four factors move the number within those ranges:
- Builder type. A national production builder selling hundreds of homes a year in a single subdivision will usually ask for less than a custom builder designing a one-off home.
- Market conditions. When inventory is tight and demand is strong, builders raise deposit requirements to filter out less-committed buyers. When demand softens, deposits shrink.
- Construction stage. A nearly finished spec home may carry a lower deposit than a to-be-built home where the builder has not yet broken ground. Pre-construction contracts tie up builder resources for months, and the deposit compensates for that commitment.
- Location and price tier. High-cost markets and communities with limited lots push deposits upward. Entry-level subdivisions keep the barrier lower.
Staged Deposits Over the Build
Earnest money on new construction is often not a single payment. Many contracts use a staged schedule that collects more money as the project hits defined milestones:
- Contract signing: an initial deposit (commonly 1% to 5%) to reserve the lot and lock in the floor plan.
- Design center selections: an additional deposit when you finalize upgrades.
- Framing or drywall completion: another installment at a structural milestone.
- Pre-closing or final walkthrough: a final installment before settlement.
By the time the home is ready to close, staged deposits can total 10% or more of the purchase price. Each installment and its trigger should be spelled out in the purchase agreement. If a milestone reads “at the builder’s discretion” rather than naming a specific construction event, ask for clearer language before you sign.
Design Center Upgrade Deposits
Upgrades go on top. When you select premium finishes, specialty cabinetry, or structural changes through the builder’s design center, the builder typically requires a separate deposit of up to 50% of the total upgrade cost. Choose $20,000 in upgrades and you may need to put down as much as $10,000 when you sign off on those selections.
The reason is resale risk. A standard white quartz countertop can go into the next buyer’s home; a custom-cut exotic stone likely cannot. The deposit covers the builder’s procurement cost for materials that have no value to a different purchaser.
One detail many buyers miss: upgrade deposits often become non-refundable once materials are ordered or construction reaches a set milestone, such as the start of framing. Ask the builder exactly when your upgrade deposit locks in, because that date can arrive well before closing.
How the Money Is Paid and Held
The initial deposit is usually due at signing or within one to three business days. Builders accept wire transfers, certified checks, or personal checks depending on their policies. In most cases the funds go into a third-party escrow account managed by a title company, escrow agent, or attorney, and the escrow holder releases them only according to the contract.
State laws govern how quickly deposits must land in escrow and who is allowed to hold them. Many states require that licensed agents or attorneys deposit earnest money into a trust or escrow account within a few business days. If a builder asks to hold your deposit directly, without a neutral third party, you take on additional risk. Recovering money held outside escrow becomes significantly harder if the builder runs into financial trouble.
Some states require builders to post a surety bond or maintain a trust account to protect buyer deposits. Requirements vary, so check your state’s rules or ask the builder directly what protections are in place.
Getting Your Deposit Back
Whether you can recover your earnest money depends on the contingencies in the contract and on who defaults. Contingencies are provisions that let you cancel and keep the deposit if specific conditions are not met. Builders draft their own contracts, and those contracts may limit protections that a standard resale contract would include.1Freddie Mac. Understanding Contingency Clauses in Homebuying
Financing Contingency
A financing contingency gives you a window to secure mortgage approval. Most builder contracts include one, but some narrow it to cover only initial approval and exclude later problems like an appraisal shortfall. Once you receive conditional approval, the contingency may expire, leaving the deposit at risk if the loan later falls through.
Appraisal Contingency
An appraisal contingency protects you if the completed home appraises for less than the contract price. Without one, you must cover the gap in cash or risk losing the deposit by failing to close. Many builder contracts either exclude the appraisal contingency or fold it into the financing contingency with a short expiration. Structural upgrades and design center choices are common culprits for appraisal gaps, because an appraiser may not assign full value to every customization.
Inspection Contingency
Construction defects happen even on brand-new homes, and a pre-closing inspection by an independent inspector can catch issues the builder’s quality checks miss. If the contract includes an inspection contingency and the inspector finds material defects the builder refuses to fix, you can cancel and keep the deposit. Builder contracts often omit the clause, so check before signing.
Before you sign, identify which contingencies are included, when each expires, and what triggers the expiration. If a contingency you need is missing, ask the builder to add it. Not every builder will negotiate, but the request is reasonable for a large deposit.
If the Builder Defaults
If the builder fails to complete the home, misses the contractual delivery date, or goes out of business, you are generally entitled to a full refund of earnest money and upgrade deposits. Recovery is easier when the money sits in third-party escrow. When the builder held the deposit directly, getting it back from a financially distressed company can require legal action. Look for a contract clause that specifies what happens if the builder cannot deliver by a stated deadline, including whether deposits are returned automatically.
When You Could Lose It
Most new-construction contracts include a liquidated damages clause. If you default — refuse to close, fail to secure financing after your contingency period expires, or change your mind — the builder can keep your earnest money and upgrade deposits as pre-agreed compensation for the time the home was off the market. Courts generally enforce these clauses when the retained amount is a reasonable estimate of the builder’s actual losses rather than a penalty.
Common ways buyers forfeit a deposit:
- Backing out after contingencies expire. Once financing and appraisal contingencies lapse, you lose the contractual right to cancel without penalty.
- Missing contract deadlines. Failing to submit mortgage documents, finalize design selections, or complete a required walkthrough on time can put you in default.
- An appraisal gap you can’t cover. If the home appraises below contract price and you waived the appraisal contingency, you either bring the extra cash or forfeit the deposit.
Some builder contracts include an election clause letting the builder choose between keeping the deposit as liquidated damages or suing for actual damages, whichever is greater. Read the remedies section carefully, and consider having a real estate attorney review the contract before you sign.
How the Deposit Shows Up at Closing
When the home is finished and you reach settlement, every dollar of earnest money and upgrade deposits is credited back to you. The funds reduce your cash-to-close and can be applied toward your down payment, closing costs, or both.
These credits appear on your Closing Disclosure, the standardized form your lender provides before closing. The deposit is itemized as a credit that reduces the cash you need to bring.2Consumer Financial Protection Bureau. 12 CFR 1026.38 – Content of Disclosures for Certain Mortgage Transactions If your total deposits exceed your down payment and closing costs, which can happen with large staged deposits on a high-LTV loan, the excess is refunded after settlement. Review the Closing Disclosure as soon as you receive it to confirm every deposit is accounted for. Catching a missing credit before closing day is far easier than correcting it afterward.