Jeff Merrill | Sioux Falls Realtor

By Jeff Merrill | July 26, 2026

Earnest money is the first real money you put on the table when you buy a house, and it’s one of the questions I get most often from buyers who are about to write their first offer in Sioux Falls. You’ve found the house. You’re ready to move. And then your agent asks how much you want to put down as earnest money, and suddenly you’re wondering if you’re about to hand over a check you’ll never see again.

Here’s the short version: you almost certainly will see it again. Earnest money isn’t a fee, and in most cases it isn’t lost. It’s your good-faith deposit — proof to the seller that you’re serious enough to take the home off the market while you finish inspections, appraisal, and financing. Let me walk you through how much to offer, where it goes, and how to keep it protected.

What earnest money is — and where it actually goes

When your offer is accepted, you write an earnest money check (or send a wire) within a few days. That money doesn’t go to the seller. In South Dakota, it’s held by a neutral party until closing.

On a resale home, the listing brokerage almost always holds your earnest money in a trust account. South Dakota real estate brokers are required by the state Real Estate Commission to keep client funds in a separate trust account — they can’t mix it with their own money, and they can’t release it without both sides agreeing or a clear contract provision. On new construction, the builder often holds the deposit directly, and sometimes a title company holds it. We don’t use the word “escrow” much here the way coastal markets do — in South Dakota, a title company handles the closing itself, and a broker trust account holds the earnest money in between.

The most important thing to understand: earnest money is credited back to you at closing. It gets applied toward your down payment and closing costs. So if you put down $3,000 in earnest money and you owe $12,000 at the table, you now owe $9,000. It was your money the whole time — you just committed it early.

How much should you offer in Sioux Falls?

South Dakota tends to run leaner on earnest money than the national average. Nationally you’ll hear 1% to 3%. Here, most resale offers land right around 1% of the purchase price.

On a Sioux Falls home priced near the current median of about $314,000, that’s roughly $3,000 to $3,200. Here’s how that scales:

• $250,000 home — about $2,500
• $314,000 home (near median) — about $3,000 to $3,200
• $400,000 home — about $4,000
• $500,000 home — about $5,000

But the number isn’t fixed, and this is where strategy matters. Earnest money is negotiable on a resale, and a larger deposit is one of the cleanest ways to make your offer stand out without raising your price. In a competitive situation — say, a well-priced home in Brandon or a move-in-ready house in west Sioux Falls that just hit the market — offering $5,000 or $6,000 in earnest money instead of $3,000 signals to the seller that you’re locked in. It costs you nothing extra, because it all comes back to you at closing anyway. It just tells the seller you’re not going anywhere.

New construction works differently. When you’re building in the Tea, Harrisburg, or northwest corridor with a builder like Allen Homes, Van Buskirk, or Cordes, the builder usually sets the earnest money amount rather than negotiating it — and it’s often higher, in the 1% to 5% range, sometimes as a fixed dollar figure tied to your options and upgrades. Builders ask for more because they’re committing to construction on your behalf, and the deposit is harder to get back once ground is broken. If you’re weighing a new build, it’s worth understanding how builder contracts and representation work before you sign anything.

When you get your earnest money back — and when you don’t

This is the part that keeps buyers up at night, so let’s be clear about it.

Your earnest money is protected by the contingencies written into your purchase agreement. A contingency is a condition that has to be met for the deal to move forward. If a covered contingency isn’t satisfied and you walk away inside the deadlines, you get your deposit back. The common ones are:

1. Financing contingency — if your loan falls through, you’re covered.
2. Appraisal contingency — if the home appraises below the purchase price and you can’t reach a new agreement with the seller, you can back out.
3. Inspection contingency — if the inspection turns up problems you’re not willing to accept, you can cancel. This is also your protection window for radon testing, which matters a lot in Sioux Falls, since Minnehaha and Lincoln counties sit in a high-radon zone.
4. Title contingency — if the title company finds a problem with clear ownership, you’re protected.

So when do you actually lose earnest money? When you walk away for a reason not covered by a contingency, or after your contingency deadlines have passed. If you simply change your mind, get cold feet, or decide you found a house you like better after your inspection period closes, the seller can typically keep your deposit. That’s the whole point of it — it compensates the seller for taking the home off the market and then having the deal collapse for no contractual reason.

The lesson: don’t waive contingencies casually to win a bidding war, and watch your deadlines closely. Every date in your contract is a date your earnest money is riding on.

Protecting your deposit from wire fraud

One more thing I tell every buyer, because it’s real and it happens in South Dakota too. When it’s time to send your earnest money, criminals sometimes send fake wire instructions that look like they came from your agent or the title company.

Before you wire a single dollar, call the title company or your agent using a phone number you already have — not a number from the email — and verbally confirm the wire instructions. If anything about the request feels rushed or the account details changed at the last minute, stop and call. A legitimate title company will never be upset that you double-checked.

The bottom line

Earnest money in Sioux Falls usually means putting about 1% of the price down — around $3,000 on a typical home — as a good-faith deposit that comes right back to you as a credit at closing. On resale homes it’s negotiable, and a stronger deposit can win you the house without raising your offer. On new construction, expect the builder to set a higher, fixed amount. And as long as your contingencies are in place and you hit your deadlines, your money stays protected.

Because your earnest money folds into your down payment and closing costs, it’s worth understanding the whole cash picture before you write an offer — including the down payment assistance programs that can lighten what you bring to the table.

Frequently Asked Questions

Is earnest money refundable in South Dakota?

Yes, in most cases. If you back out for a reason covered by a contingency in your purchase agreement — financing, appraisal, inspection, or title — and you’re within your deadlines, you get your earnest money back. You typically lose it only if you walk away for a reason not covered by a contingency or after those deadlines have passed.

Who holds earnest money in a Sioux Falls home purchase?

On a resale home, the listing brokerage holds it in a trust account regulated by the South Dakota Real Estate Commission — separate from the brokerage’s own funds. On new construction, the builder often holds it directly, and in some deals a title company holds it until closing. South Dakota uses a title company to run the closing rather than a coastal-style escrow company.

Does earnest money count toward my down payment?

Yes. Earnest money is not an extra cost. It’s applied as a credit toward your down payment and closing costs at closing, so it reduces what you owe at the table dollar for dollar.

How much earnest money should I offer to win a competitive home in Sioux Falls?

In a multiple-offer situation, offering more earnest money — say $5,000 to $6,000 instead of the typical $3,000 — is a low-risk way to strengthen your offer, since it all comes back to you at closing. It signals to the seller that you’re committed without requiring you to raise your purchase price.

Do I pay more earnest money on a new construction home?

Usually, yes. Builders in the Tea, Harrisburg, and northwest Sioux Falls corridor often require 1% to 5% of the price as earnest money, and they typically set the amount rather than negotiate it. Because the builder commits to construction on your behalf, the deposit can also be harder to recover once building begins.

If you’re getting ready to write an offer and you’re not sure how much earnest money makes sense for your situation, I’m happy to walk you through it before you commit a dollar. This is exactly the kind of thing I coach my buyers through so they write a strong offer and keep their deposit protected. Reach out anytime at 605-201-2846 or through siouxfallsgreathomes.wordpress.com.

About Jeff Merrill

Jeff Merrill leads The Jeff Merrill Team, powered by eXp Realty, serving Sioux Falls and the surrounding South Dakota communities of Madison, Mitchell, Canistota, and beyond. He helps motivated buyers, sellers, and new agents cut through the hype in real estate with honest guidance, hands-on mentorship, and a track record of real results. Connect with Jeff at siouxfallsgreathomes.wordpress.com or 605-201-2846.