Jeff Merrill | Sioux Falls Realtor

During the frenzy of 2021 through 2023, waiving the inspection became one of the most common ways buyers tried to stand out. Homes drew a dozen offers, and dropping contingencies felt like the price of admission. That pressure hasn’t fully gone away, and it’s still one of the questions I get asked most by buyers across Sioux Falls, Harrisburg, and Tea.

Here’s the short version: waiving your inspection is one of the riskiest moves you can make in a home purchase, and in today’s market you almost never have to.

Let me walk you through what you’d actually be giving up, what an inspection costs, and how to compete without gambling on a house you’ve never had a professional look at.

What “waiving the inspection” actually means

There’s an important distinction most buyers miss, so let’s clear it up first.

Waiving the inspection contingency is not the same as skipping the inspection. You can still hire an inspector to walk the home — you just give up your contractual right to renegotiate or walk away based on what they find.

When you keep the inspection contingency, you get two things:

• Leverage. If the inspector finds a cracked heat exchanger or a failing sewer line, you can ask the seller to repair it, credit you money, or drop the price.
• An exit. If the problems are worse than you can stomach, you can cancel the contract and get your earnest money back.

Waive that contingency, and both disappear. You can still learn about the problems — you just can’t do anything about them except accept the house as-is or lose your deposit walking away. In South Dakota, your earnest money is held in the listing brokerage’s trust account, and once you’re outside your contingencies, it’s exposed. If you want the full picture on that, I broke it down in my guide on how much earnest money you need in Sioux Falls.

One more thing buyers lean on that they shouldn’t: the seller’s disclosure. South Dakota requires most sellers to complete a Seller’s Property Condition Disclosure Statement under SDCL 43-4-44. That’s useful, but it only covers what the seller actually knows about. It’s not a substitute for a trained inspector crawling the attic and testing the systems. Plenty of real problems have never crossed the seller’s radar.

What a Sioux Falls home inspection costs — and what it catches

An inspection is cheap insurance. Here’s what you’ll typically pay in the Sioux Falls area, based on square footage:

• Under 2,000 sq ft: $280 to $400
• 2,000 to 4,000 sq ft: $400 to $510
• Over 4,000 sq ft: $510 to $650

For that money, a licensed inspector goes through the roof, foundation, structure, HVAC, plumbing, electrical, water heater, and drainage — the systems that quietly drain your savings when they fail. A single furnace or AC replacement runs $6,000 to $12,000. A sewer line repair can run higher. Set that against a $400 inspection, and the math makes itself.

Two Sioux Falls-specific issues deserve their own line items.

Radon. Minnehaha and Lincoln counties both sit in EPA Radon Zone 1, the highest-risk category, and local averages run well above the EPA’s 4.0 action level. A radon test adds roughly $150 to $250, and it’s cheaper bundled with the inspection than ordered separately. If you’re weighing whether it’s worth it, I covered the full case in my post on radon testing for Sioux Falls homes.

Older homes and newer builds both need eyes on them. In established areas like McKennan Park, older West Sioux Falls, and parts of Brandon, you’re often buying character along with aging furnaces, older wiring, and settling foundations. On the new-construction side in Tea and Harrisburg, buyers assume a brand-new home is flawless — it isn’t. Punch-list items, drainage grading, and passive radon systems that need an active fan upgrade all show up on inspections of new builds. If you’re comparing the two, my breakdown of new construction versus resale in Sioux Falls goes deeper.

When waiving makes sense — and when it’s a mistake

I won’t tell you never to waive, because there are narrow situations where it’s a calculated risk. But they’re narrow.

Waiving might be defensible when:

• You’re a cash buyer or investor who can absorb surprise repairs without blinking.
• The home is brand-new construction still under builder warranty, and you’re at least doing a pre-drywall or final walkthrough.
• You’ve had an inspector walk the property before writing the offer, so you’re waiving with full knowledge, not blind.

Waiving is a mistake when:

• It’s your primary residence and your savings can’t cover a five-figure surprise.
• The home is older or has visible deferred maintenance.
• You’re doing it purely out of panic because you lost the last two houses.

That last one matters, because the market has shifted. Sioux Falls in 2026 is far more balanced than it was two years ago. Inventory has climbed, mortgage rates have settled around 6.8%, and homes are averaging roughly 40 days on the market instead of selling in a weekend. Buyers have more room to negotiate — which means the pressure to strip contingencies just to be competitive has eased. Patience and a disciplined offer win more often than a reckless one.

How to compete without going in blind

If you’re in a multiple-offer situation and want your bid to stand out, there are stronger levers than waiving your inspection:

• Shorten the inspection window instead of eliminating it. Offer to complete your inspection and repair requests in five days instead of the typical seven to ten. You keep your protection; the seller gets speed.
• Ask only for major, safety, or structural repairs. Signal up front that you won’t nickel-and-dime over a loose doorknob. Sellers fear the death-by-a-thousand-cuts buyer, not the reasonable one.
• Strengthen the parts of your offer that cost the seller nothing extra — a larger earnest deposit, a flexible closing date, or a rent-back if they need time to move.
• Get fully underwritten pre-approval, not just a pre-qualification letter. A clean, ready-to-close buyer often beats a slightly higher offer that looks shaky.

You can look strong without exposing yourself to a house you’ve never had inspected. That’s the balance I help my clients strike on every competitive offer, and it’s usually the difference between winning smart and winning into a money pit.

Frequently Asked Questions

Is a home inspection required to buy a house in South Dakota?

No, South Dakota doesn’t legally require a home inspection. It’s your choice as the buyer. But your lender may require certain conditions to be met, and skipping the inspection entirely means you’re buying with no independent look at the home’s condition.

How long is the inspection contingency period in Sioux Falls?

Most South Dakota purchase contracts give buyers about 7 to 10 days after acceptance to complete the inspection and submit repair requests. Sellers then typically have 3 to 7 days to respond. Miss your deadline and you lose your leverage, so mark the date and work backward from it.

Can I still get my earnest money back if I waive the inspection?

If you waive the inspection contingency, you give up the right to cancel over inspection findings and keep your deposit. You may still have other contingencies — financing, appraisal, and title — that protect your earnest money, but inspection-related problems would no longer be a covered reason to walk away.

Does the seller’s disclosure replace a home inspection?

No. The South Dakota Seller’s Property Condition Disclosure Statement (SDCL 43-4-44) only covers defects the seller actually knows about. An inspector finds problems the seller may have no idea exist, which is exactly why the disclosure and the inspection do different jobs.

Should I inspect a brand-new construction home in Tea or Harrisburg?

Yes. New homes still have defects — drainage and grading issues, incomplete punch-list work, and passive radon systems that may need an active fan after testing. A new build under warranty is lower-risk, but an inspection gives you a documented list to hand the builder before you close.

The bottom line

Waiving the home inspection can make your offer look stronger for a day, and cost you tens of thousands over the years you own the house. In a Sioux Falls market that’s finally handed some leverage back to buyers, that’s a trade you rarely need to make. A $400 inspection and a well-structured offer will almost always serve you better than going in blind.

If you’re weighing whether to keep or drop your inspection on a specific home, that’s exactly the kind of call I walk my clients through before we ever write the offer. Reach out anytime at 605-201-2846, and let’s make sure your offer is strong and smart.

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 call 605-201-2846.

You’ve probably typed “how much house can I afford” into a calculator, gotten a big round number, and felt either relieved or gut-punched. Neither reaction is worth much, because those national calculators don’t know Sioux Falls.

They don’t know our property taxes run about 1.5% of value. They don’t know we sit in hail country, where insurance costs more than most of the country. And most of them are still using last year’s interest rate.

Let’s fix that. Here’s how affordability actually works here in the summer of 2026 — with real numbers you can check against your own paycheck.

Start with the 28/36 rule, then make it local

Lenders lean on a guideline called the 28/36 rule, and it’s a good place to start.

The idea is simple. Keep your total monthly housing payment at or under 28% of your gross (pre-tax) monthly income. Then keep all your debt payments combined — housing plus car loans, student loans, and credit card minimums — at or under 36%.

That first number, 28%, is your housing ceiling. And “housing payment” means more than principal and interest. It means the full PITI: Principal, Interest, property Taxes, and homeowners Insurance — plus mortgage insurance if you put down less than 20%.

Here’s where Sioux Falls buyers get tripped up. Two of those four letters are bigger here than the calculators assume. Our property taxes and our insurance both run above the national middle, so the same monthly payment buys you a smaller loan than it would in a low-tax, low-insurance market.

Many loan programs will let you stretch past 36% on the back end — FHA and some conventional loans approve buyers at 43% to 50% total debt. You can borrow more. Whether you should is a different question, and that’s the one worth answering before you fall in love with a listing.

A real Sioux Falls example: the $340,000 median home

The median Sioux Falls home sold for about $340,000 this summer, up roughly 4% from a year ago. Thirty-year fixed rates just hit a one-year high, sitting around 6.75%. So let’s build the actual payment on that median home, two ways.

First, with 5% down — the path most first-time buyers take.

• Down payment: $17,000
• Loan amount: $323,000
• Principal & interest (6.75%): ~$2,095/mo
• Property taxes (~1.5%): ~$425/mo
• Homeowners insurance: ~$225/mo
• PMI (under 20% down): ~$140/mo
• Total monthly payment: ~$2,885/mo

To keep that $2,885 payment at or under 28% of your gross income, you’d need roughly $123,000 a year. Push to a 31% housing ratio, which plenty of solid buyers do, and you’re closer to $111,000. That’s before any car payment or student loan eats into your 36% back-end room.

Now watch what 20% down does.

• Down payment: $68,000
• Loan amount: $272,000
• Principal & interest (6.75%): ~$1,765/mo
• Property taxes (~1.5%): ~$425/mo
• Homeowners insurance: ~$225/mo
• PMI: $0 — gone
• Total monthly payment: ~$2,415/mo

That payment fits a household income around $95,000 to $105,000 at a comfortable ratio. Dropping PMI and shrinking the loan saved almost $500 a month and cut the income you need by nearly $20,000 a year.

Flip the question around. If your household brings in $80,000 with a modest car payment, you’re realistically shopping in the $250,000 to $290,000 range with 5% down. That still opens up a lot of resale inventory in Brandon, older west Sioux Falls, and established Harrisburg neighborhoods — it just won’t reach most new construction in the Tea and Harrisburg corridor, where the median new build runs closer to $385,000.

The levers that move your number

Your maximum price isn’t fixed. A handful of things push it up or down, and some are in your control.

Your down payment. As the two examples show, getting to 20% erases PMI and shrinks the loan. But don’t drain your savings to get there — you still need cash for closing costs, which run 2% to 5% in Sioux Falls, plus a cushion for the first repair. If a bigger down payment leaves you with nothing, a smaller one plus PMI is the smarter play.

Down payment assistance. If cash is the wall you’re hitting, look at South Dakota Housing’s first-time buyer program. It pairs a fixed-rate first mortgage with 3% or 5% of the price as down payment help, which can be the difference between renting another year and owning now.

Your other debts. That 36% back-end ceiling is real. A $500 car payment doesn’t just cost $500 — at a 28% housing ratio, it can knock $60,000 to $75,000 off the home price you qualify for. Paying off a card or holding off on a new truck before you apply is often the fastest way to buy more house.

Property taxes you can verify. Don’t guess. Every listing’s tax bill is public through the Minnehaha or Lincoln County treasurer, and it feeds straight into your escrow. A slightly cheaper home with a much higher tax bill can carry the same monthly payment as a pricier one. For the full picture, here’s how Sioux Falls property taxes work and the owner-occupied classification that lowers them after you buy.

The insurance quote you get before closing. Because we’re in hail country, premiums vary a lot by roof age and claims history. Get a real quote early — not at the closing table — so a $3,600 policy doesn’t blow up a budget you built around $2,500.

The single best move is a full pre-approval from a local lender before you tour a thing. Not a 30-second online pre-qualification — a real one, where someone verifies your income and debts and hands you a maximum price and a monthly payment you’ve actually looked at. In a market with roughly a three-month supply of homes, that pre-approval is also what makes your offer credible when you find the one.

Frequently asked questions

What income do you need to buy a house in Sioux Falls?

At mid-2026 rates near 6.75%, buying the $340,000 median home generally takes roughly $95,000 to $125,000 in gross household income. Twenty percent down lands most buyers around $95,000 to $105,000; five percent down with PMI pushes it toward $115,000 to $125,000. Car loans, student loans, and credit card minimums move your number down from there.

How much house can I afford making $80,000?

With modest debts and 5% down, most $80,000 households land in the $250,000 to $290,000 range at today’s rates. That covers a lot of resale inventory in Brandon, west Sioux Falls, and older Harrisburg neighborhoods, but stops short of most new construction. A larger down payment or down payment assistance stretches it.

What is the 28/36 rule?

Keep your total housing payment at or under 28% of gross monthly income, and all debt payments combined at or under 36%. Many loan programs allow higher back-end ratios, but 28/36 is the comfort zone that keeps you from being house-poor.

Why does affordability feel worse than it did last year?

Two reasons. Thirty-year rates climbed to a one-year high near 6.75%, and the median Sioux Falls price rose about 4%. A higher rate on a higher price means a bigger monthly payment for the same house — which is exactly why the payment, not the sticker price, is the number to watch.

Should I buy at the top of my budget?

Rarely. The 28% ceiling assumes nothing goes wrong. Leave room for a new roof, a furnace, a job change, or a hail claim deductible. Buying $30,000 under your max is what keeps a home from becoming a stressor.

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, Brandon, Harrisburg, Tea, and beyond. Jeff helps buyers, sellers, and new agents make clear-eyed decisions with straight talk and local numbers. Reach him at 605-201-2846.

You’re standing in a half-built cul-de-sac in Tea, and the finishes are exactly what you pictured. The next day you tour a 1990s ranch in Brandon with real trees and $65,000 less on the price tag. Now you’re stuck.

This is the fork almost every Sioux Falls buyer hits in 2026, and the honest answer isn’t “new is better” or “resale is smarter.” It’s a trade — and once you see what you’re actually trading, the choice gets a lot clearer. Let’s put real numbers on it.

The price gap is real — but the real cost is closer than it looks

Start with the sticker. New construction in the Sioux Falls area sits at a median around $385,500. Existing homes sit near $320,000. That’s about a $65,000 spread, and it’s the first thing that scares buyers off new builds.

But the list price isn’t the price you live with. Three things quietly close that gap.

Builder incentives. Production builders in this market are moving standing inventory with real money — rate buydowns, closing-cost credits, and free upgrades that commonly stack to $15,000 to $40,000. On a home listed at $385,000, a $25,000 incentive package puts your effective cost at $360,000. The catch: most of those incentives require the builder’s preferred lender or title company, so you have to compare the whole package — rate, loan fees, upgrade pricing, and monthly payment — not just the headline number.

Lower first-year costs. A new home in Harrisburg or NW Sioux Falls comes with a new roof, new HVAC, new water heater, and a builder warranty. You’re not replacing a furnace in year two. Modern insulation and windows also trim your utility bills. That older ranch in Brandon might be $65,000 cheaper and still cost you $12,000 in deferred maintenance the first two years.

Where the negotiating room actually is. Here’s the twist most buyers miss. New builds in the metro average around 163 days on market. Existing homes average about 82. That longer shelf life on new construction isn’t weak demand — it’s more inventory sitting at once, and it means the builder is more willing to deal. Resale, meanwhile, is a knife fight: inventory is tight at under two months of supply, and Harrisburg resales have been selling at 99.2% of list — the highest sale-to-list ratio in the metro. So the “cheaper” resale often costs you an over-list bidding war, an appraisal gap, and a waived contingency to win it.

What new construction gives you — and what it quietly costs

The appeal of a new build is obvious the second you walk in. Nobody else’s carpet, nobody else’s roof age, a floor plan you helped pick, and a warranty behind it. In the fast-growing Tea, Harrisburg, and NW Sioux Falls corridors, that new product also tends to hold value well as the metro keeps growing.

But three costs hide behind the model home, and they’re the ones that surprise buyers at the closing table and after.

The lot and the landscaping. A premium lot — corner, walkout, or backing green space — can add thousands to the base price. And the base price usually buys you dirt, not a yard. Sod, trees, a driveway extension, a fence, and window coverings can run $5,000 to $25,000 out of pocket after you move in. Budget for it, because the builder’s “from” price rarely includes the finished picture in the brochure.

The property-tax jump. This one catches people cold. While your home is being built, the county assesses your parcel on the raw land value — sometimes just tens of thousands of dollars. Once the home is finished and you take occupancy, it’s reassessed at the full value of land plus structure. Your first full tax bill can be several times what the lot showed. Two moves protect you: ask your lender to escrow based on the completed value so you’re not short, and file your owner-occupied classification with the county after closing to lock in the lower residential rate.

The build timeline and the process. A spec home might be 30 days out; a to-be-built can be six to nine months. That’s a long time to carry your current housing, and builders often ask for larger, fixed earnest-money deposits that are harder to recover than on a resale — I break that down in how much earnest money you need in Sioux Falls. One more thing: the builder’s on-site rep works for the builder, not for you. Bring your own agent to the first visit, because most builders honor buyer representation only if you register an agent up front. Here’s the full rundown on whether you need a realtor for new construction.

And yes — you still get the home inspected. A new house is built by people, and people miss things. An independent inspection at your final walkthrough catches punch-list items while the builder is still obligated to fix them. In a Radon Zone 1 county like Minnehaha or Lincoln, test the new build too; passive radon systems cut levels but don’t always finish the job, as I cover in radon testing for Sioux Falls homes.

What resale gives you — and where it bites

An existing home in McKennan Park, established West Sioux Falls, or Brandon buys you things a new subdivision can’t fake. Mature trees. A finished, landscaped yard. An established neighborhood with character. And you move in now, not in nine months.

Resale also hands you leverage new construction doesn’t. When the inspection turns up a worn roof or an aging furnace, that’s a negotiation — a price cut, a repair, or a credit. And in South Dakota the seller must give you a Seller’s Property Condition Disclosure Statement under SDCL 43-4-44, so you’re buying with the home’s history on paper. New construction typically comes with a limited or no disclosure because there’s no history yet.

The bite is competition and age. You’re shopping scarce inventory against other buyers, which is how sticker savings evaporate into an over-list offer. And you’re inheriting someone else’s mechanicals — the roof has a clock on it, the water heater has a clock on it, and those clocks become your repair bills. Whichever way you go, the SD closing runs through a title company, not an escrow company, and the seller pays the state transfer fee — so your buyer-side costs look similar on both.

So which one is right for you?

Lean new construction if you want low maintenance, modern efficiency, and a floor plan you control — and you have the timeline to wait and the cash to finish the yard. The builder incentives on standing inventory in Tea and Harrisburg right now are the strongest argument for buying new in years.

Lean resale if you want a specific established neighborhood, mature landscaping, a faster move-in, and the lower sticker — and you’re prepared to compete and to budget for aging systems.

The buyers who regret their choice are almost always the ones who compared list price to list price and stopped there. The right comparison is total cost to own for the first few years: incentives, maintenance, taxes after reassessment, and what you’ll spend to make the place feel finished.

FAQ

Is new construction more expensive than resale in Sioux Falls?
Yes on the sticker — a median near $385,500 versus about $320,000 for existing homes, roughly a $65,000 gap. But builder incentives worth $15,000 to $40,000, plus lower first-year maintenance and utility costs on a new home, narrow the real difference more than the list prices suggest.

Do you still need a home inspection on a brand-new house?
Yes. A new home is built by people, and people miss things. An independent inspection at your final walkthrough catches unfinished punch-list items and HVAC, plumbing, or grading issues while the builder is still on the hook to fix them under warranty. It’s a few hundred dollars against a high-six-figure purchase.

Why do new-construction homes sit on the market longer in Sioux Falls?
New builds average around 163 days on market versus about 82 for existing homes. That’s not weak demand — it’s inventory. Builders carry standing spec homes and release lots in phases, so there’s more new product available at once. For you, that longer shelf life means more room to negotiate than on a resale that draws multiple offers in a weekend.

Will my property taxes jump after buying new construction?
Often yes. During the build the county assesses your parcel on raw land value. Once the home is finished and you take occupancy, it’s reassessed at the full value of land plus structure, so the first full tax bill can be much higher than what the lot showed. Ask your lender to escrow based on the completed value, and file your owner-occupied classification after closing for the lower residential rate.

Is a resale home a better deal in a seller’s market?
It can be on price, but you’ll compete for it. With inventory under two months of supply and Harrisburg resales selling at 99.2% of list, existing homes draw bidding wars that erase the sticker savings. New construction is where the negotiating room usually is right now — which is why the cheaper-on-paper resale isn’t always the cheaper home to actually buy.

Let’s tour both before you decide

The smartest way to settle the new-versus-resale question is to walk one of each with someone who’ll give you the real numbers — incentives, taxes after reassessment, and total cost to own, not just the list price. If you’re weighing a build in Tea, Harrisburg, or NW Sioux Falls against a resale in Brandon or West Sioux Falls, let’s map it against your budget and timeline.

Call or text me at 605-201-2846, or start at siouxfallsgreathomes.wordpress.com. If a new build is winning you over, read whether you need a realtor for new construction first — it can save you real money.

About Jeff Merrill: Jeff Merrill leads The Jeff Merrill Team, powered by eXp Realty, serving Sioux Falls and the surrounding South Dakota communities of Brandon, Harrisburg, Tea, Madison, Mitchell, Canistota, and beyond. Jeff helps buyers, sellers, and new agents make clear, confident decisions with straight talk and local numbers — no hype, no hedging. Reach him at 605-201-2846.

You’ve saved for the down payment. You found the house. Then your lender hands you a number for “closing costs,” and it’s thousands of dollars you weren’t planning on.

This catches Sioux Falls buyers off guard all the time. So let’s put real numbers on it, break down every line, and talk about how you actually shrink the check you write at closing.

The short answer, in dollars

Plan on 2% to 5% of the purchase price. The average buyer in South Dakota pays about 3.73%.

Here’s what that looks like across the price points you’re likely shopping in the Sioux Falls metro:

• $300,000 home — about $6,000 to $15,000, with most buyers near $11,000
• $335,000 home (the June 2026 median) — about $6,700 to $16,750, with most near $12,000
• $385,000 new build (the new-construction median) — about $7,700 to $19,250

That’s a wide range because your loan type, your lender, your insurance, and the time of month you close all move the number. But the middle of that range — right around 3% to 3.7% — is where most Sioux Falls buyers actually land.

And to be clear: this is separate from your down payment. If you’re putting 5% down on a $335,000 home, that’s about $16,750 for the down payment plus roughly $10,000 to $12,000 in closing costs. Knowing both numbers up front is the difference between a smooth closing and a scramble the week before.

What’s actually in your closing costs

Your closing costs aren’t one fee. They’re a stack of them, and they fall into three buckets: lender fees, third-party services, and prepaids.

Lender fees. This is the origination side — loan origination, underwriting, and processing. Together they often run 0.5% to 1% of your loan amount, so figure $1,500 to $3,000 on a typical Sioux Falls mortgage. Ask your lender for a Loan Estimate and read this section closely, because it’s the part that varies most from lender to lender.

Third-party services. These pay the people who verify the home is worth the price and clean to buy. Your appraisal runs $350 to $600 in Sioux Falls — more if you’re buying acreage out toward Canistota or Madison, where the appraiser has more ground to cover. Your home inspection is $300 to $500, and if you add a radon test — smart in Minnehaha and Lincoln counties, which sit in EPA Radon Zone 1 — that’s another $150 to $250. Then there’s the title work: the title company runs your closing here in South Dakota (we don’t use escrow companies the way coastal states do), and you’ll pay closing fees plus a lender’s title insurance policy, usually a few hundred dollars. Owner’s title insurance is commonly picked up by the seller in this market.

Prepaids and escrow reserves. This is the bucket that surprises people, because it’s not really a “fee” — it’s money for costs you’d owe anyway, just collected early. It includes your first year of homeowners insurance (often $1,500 to $2,500), prepaid interest from your closing date to the end of the month, and a few months of property taxes and insurance set aside in your escrow account so your lender can pay those bills when they come due. Buy on the 3rd of the month and you’ll prepay almost a full month of interest. Buy on the 28th and you’ll prepay just a few days. Small timing choice, real dollars.

One line you won’t see on the buyer side: the South Dakota transfer fee. That’s the $0.50 per $500 of value under SDCL 43-4-21, and in this state the seller pays it. It’s one of the reasons buying here costs less at the table than in a lot of the country.

Your real target number is “cash to close” — and you have levers

Closing costs are only part of the check. The number that matters is your cash to close, and it works like this:

Down payment, plus closing costs and prepaids, minus your earnest money, minus any seller concessions. Your earnest money deposit — usually around 1% of the price in Sioux Falls — isn’t an extra cost. It’s a credit that comes back to you at closing and counts toward this total.

Now the part most buyers don’t push on: several of these costs are negotiable or coverable.

Seller concessions. You can ask the seller to pay part of your closing costs — written right into your offer. How well that lands depends on the listing. Sioux Falls is still a seller’s market in 2026, with inventory down around 30% and about a 3.3-month supply, so on a fresh, well-priced home in Harrisburg or Tea you’re not likely to win a big concession. But on a listing that’s been sitting, or on standing builder inventory the builder wants moved before quarter’s end, asking for $5,000 toward your costs is a reasonable play. Just know your loan type caps how much the seller can contribute.

Lender credits. Your lender can cover some closing costs in exchange for a slightly higher interest rate. That trade can make sense if you’re tight on cash now and plan to refinance or move within a few years — but run the math, because over a long hold you pay it back in interest.

Down payment assistance. If you qualify, South Dakota Housing programs can cover a chunk of your down payment and, in some cases, help with costs. I walk through those in detail in down payment help for Sioux Falls first-time buyers.

New construction. Builders like Allen Homes, Van Buskirk, and Cordes often cover part of your closing costs if you use their preferred lender. That incentive is real money — sometimes several thousand dollars — but compare the preferred lender’s rate and fees against an outside quote before you commit, because a rate that’s a quarter-point higher can quietly erase the savings.

You can also shop the pieces you control. Inspection and title costs vary by provider, and a good buyer’s agent — which is what I do for a living — helps you order this stack so nothing is a surprise on closing day.

Frequently asked questions

Do buyers pay the transfer fee in South Dakota?
No. South Dakota’s transfer fee (SDCL 43-4-21, $0.50 per $500 of value) is paid by the seller, not the buyer. On a $335,000 home that’s a $335 cost the seller carries, not you.

Can I roll closing costs into my mortgage?
Usually not directly on a conventional purchase — closing costs are paid at the table, not financed into the loan. But you can effectively cover them three ways: seller concessions written into your offer, lender credits in exchange for a higher rate, or down payment assistance if you qualify. Some VA and USDA loans have their own rules that allow more flexibility, so ask your lender.

How much total cash do I need to buy a $335,000 home in Sioux Falls?
Budget your down payment plus roughly $10,000 to $12,000 in closing costs and prepaids. At 5% down that’s about $16,750 plus $11,000, so somewhere near $27,000 to $28,000 before any seller concessions or assistance bring it down. Your earnest money is part of that total, not extra.

When do I find out my exact closing costs?
Your lender must send a Loan Estimate within three business days of your application — that’s your early read. Then you’ll get a Closing Disclosure at least three business days before closing with the final, locked figures. Compare the two line by line, and call your lender or agent about anything that jumped.

Are closing costs cheaper on new construction in Tea or Harrisburg?
Not inherently — but many builders offset them. If you use the builder’s preferred lender, they’ll often cover part of your closing costs as an incentive. Weigh that against the preferred lender’s rate before deciding, and remember new-construction appraisals in a fast-rising corridor can come in low. Here’s what to do if your Sioux Falls appraisal comes in low.

Let’s map your number before you write an offer

The buyers who close without stress are the ones who knew their cash-to-close number weeks ahead — not the ones who found out three days before. If you’re getting ready to buy in Sioux Falls, Harrisburg, Tea, Brandon, or the surrounding communities, let’s sit down and put real numbers on your specific price range and loan type.

Call or text me at 605-201-2846, or start at siouxfallsgreathomes.wordpress.com. And if you’re on the other side of a move, here’s the companion piece: what it costs to sell a house in Sioux Falls.

About Jeff Merrill: Jeff Merrill leads The Jeff Merrill Team, powered by eXp Realty, serving Sioux Falls and the surrounding South Dakota communities of Brandon, Harrisburg, Tea, Madison, Mitchell, Canistota, and beyond. Jeff helps buyers, sellers, and new agents make clear, confident decisions with straight talk and local numbers — no hype, no hedging. Reach him at 605-201-2846.

You wrote a strong offer. It got accepted. Then your lender calls and says the appraisal came in under your purchase price. Your stomach drops.

Take a breath. A low appraisal is one of the most common speed bumps in a home purchase right now, and it almost never means the deal is dead. It means you have a decision to make — and you have more leverage than most buyers realize.

Here’s exactly how this works in Sioux Falls, what your options are, and how to protect the money you’ve already put on the line.

Why appraisals come in low here right now

An appraisal is a licensed appraiser’s opinion of what a home is worth, based mostly on recent comparable sales — “comps” — of similar homes nearby. Your lender orders it because they won’t hand you a loan for more than the home is worth. If you’re putting money down, the loan is based on the appraised value, not your contract price.

The gap shows up when the contract price runs ahead of the closed sales the appraiser can point to. In Sioux Falls, that happens for a few specific reasons.

Prices have moved fast. Home values here climbed roughly 12% over the past year, well above the national pace. When prices rise quickly, closed comps lag behind where the market actually is today. An appraiser working off sales from three months ago is looking at a slower market than the one you just competed in.

You won a bidding war. In the $250,000 to $350,000 range across Tea, Harrisburg, and northwest Sioux Falls, well-priced homes still draw multiple offers. If you beat out four other buyers by going over asking, you may have paid more than the last comparable home sold for — and the appraiser only sees those closed comps.

You’re buying new construction. Builders in Tea and Harrisburg raise base prices as a community fills in. If your contract price sits above what earlier phases closed at, the appraisal can come in short. This is one reason having your own representation matters on a new build — something I covered in whether you need a Realtor for new construction in Sioux Falls.

A real Sioux Falls example

Say you agreed to pay $330,000 for a home in Harrisburg. You’re putting 10% down, so you need a loan of $297,000.

The appraisal comes back at $315,000 — a $15,000 gap.

Your lender will now only lend based on $315,000, not $330,000. Nothing about your loan-to-value math changes for the bank; the shortfall lands on you and the seller to sort out. So what are your actual moves?

Your four options when the number comes in low

Every low appraisal comes down to four paths. The right one depends on how much you want the home, how much cash you have, and how motivated the seller is.

1. Renegotiate the price down. The cleanest fix. You ask the seller to drop the price to the appraised value — $315,000 in the example above. In a balanced 2026 market, sellers are far more willing to meet you here than they were in 2021 and 2022, because they know the next buyer’s appraisal will likely come back at the same number. If the home’s been sitting or the seller needs to move, this often works.
2. Bring extra cash to close the gap. You can pay the difference out of pocket, on top of your down payment. In the example, that’s $15,000 in additional cash at closing. This makes sense if you believe in the home’s long-term value and you have the reserves. Just know it’s real money you won’t get back if you sell in a couple of years at the appraised price.
3. Meet in the middle. The seller comes down some, you bring some cash. If the seller drops to $322,500 and you cover the remaining $7,500, the deal closes and neither side eats the whole gap. This is the most common outcome I see, because it keeps a deal both sides want alive.
4. Challenge the appraisal with a Reconsideration of Value. If you and your agent believe the appraiser missed better comps or made a factual error — wrong square footage, missed a finished basement, ignored a recent sale two streets over — you can submit a Reconsideration of Value, or ROV, through your lender. An ROV works when you bring specific evidence: actual comparable sales the appraiser overlooked, or documented mistakes. It does not work as a simple “the number feels too low.” Come with data or don’t bother.

And if none of those get you there, you have a fifth path that isn’t really an option so much as a safety net.

Your appraisal contingency is the escape hatch

Most financed purchase agreements in South Dakota include an appraisal contingency. This is the clause that lets you cancel the deal — and get your earnest money back — if the home doesn’t appraise for the contract price and you can’t reach terms with the seller.

This matters because your earnest money is real money on the table. In Sioux Falls, buyers typically put down around 1% of the price, and that deposit sits in the listing brokerage’s trust account, not with a third-party escrow company. If you walk under a valid appraisal contingency, that money comes back to you. If you’d like a deeper look at how deposits work here, I broke it down in how much earnest money you need in Sioux Falls.

Here’s the part that trips buyers up: in a competitive offer, some buyers agree to waive or limit the appraisal contingency to win the home. That can be a smart strategy — but only if you understand you’re agreeing to cover any gap in cash, with no exit. Never waive that contingency without knowing exactly what you’d owe if the number comes in short. That’s a conversation to have before you write the offer, not after the appraisal lands.

What this costs and how long it takes

The appraisal itself is a buyer cost. In Sioux Falls, expect $500 to $600 for a standard single-family home, more for acreage properties near Canistota or Madison where comps are farther apart. That fee is part of your overall closing costs, which usually run 2% to 5% of the purchase price for buyers.

The appraisal typically happens within the first week or two after your offer is accepted, ordered by your lender once you’re under contract and past the inspection window. That timing is deliberate — you’ll usually know your inspection results, including anything like a radon test in your Sioux Falls home, before the appraisal comes back. It gives you a clear picture of the property before the valuation question even comes up.

If you’re stretching your down payment thin, a low appraisal can be especially stressful. That’s another reason to know your assistance options going in — I covered the state programs in down payment help for Sioux Falls first-time buyers.

What I tell my clients

A low appraisal is not a rejection of your judgment. It’s a data point, and it opens a negotiation. The buyers who handle it best are the ones who decided ahead of time how much of a gap they’d cover — and who have an agent ready to pull comps and push for a fair outcome the moment the number comes in.

Your specific move depends on the home, the seller’s situation, and your own cash position. That’s the part no online calculator can answer for you.

Frequently Asked Questions

Who pays for the appraisal in Sioux Falls?

The buyer pays, usually $500 to $600 for a standard Sioux Falls single-family home. Your lender orders it, and you typically cover it at closing or upfront as part of your buyer closing costs.

Is my earnest money refundable if the appraisal comes in low?

Yes, as long as your purchase agreement includes an appraisal contingency and you cancel within the contingency window. Your deposit is held in the listing brokerage’s trust account and returned to you when you exit under a valid contingency.

Can you actually challenge a low appraisal?

You can. You submit a Reconsideration of Value to your lender with factual evidence — comparable sales the appraiser missed or documented errors in the report. ROVs succeed on real comps and facts, not on an opinion that the number is simply too low.

Do new construction homes in Tea and Harrisburg appraise low?

Sometimes. When a builder raises base prices faster than nearby closed sales, or the only comps come from an earlier phase, the appraisal can lag the contract price. Builders such as Allen Homes, Van Buskirk, and Cordes will occasionally adjust price or add incentives if the value comes up short.

What if I can’t cover the gap at all?

If the seller won’t come down and you don’t have the cash to bridge it, you cancel under your appraisal contingency and get your earnest money back. That is exactly the situation the contingency is built to protect.

A low appraisal is a fork in the road, not a dead end. If you’re staring at a gap right now — or writing an offer and want to plan for one before it happens — I’m happy to run the comps and walk you through your options. Call or text me at 605-201-2846, or reach out 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 call 605-201-2846.

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.