Earnest Money in Portland vs. Vancouver: Who Keeps It?

What happens to your earnest money if a Portland or Vancouver home sale falls through?

In both Oregon and Washington, your earnest money — usually 1% to 3% of the purchase price (but can vary and is a strategy question to talk to your broker about) — is refundable if you back out under a valid contingency written into your contract. If you walk away without a contractual reason, the seller can keep it as liquidated damages. The key difference: Washington law (RCW 64.04.005) caps an automatically enforceable forfeiture at 5% of the purchase price, while Oregon has no statutory cap and the terms of your OREF sale agreement (or whatever sale agreement you use) control what happens.

By Rick Sadle | July 30, 2026

Earnest money is one of the most misunderstood parts of a home purchase, and it's one of the questions I get asked most often — usually with a nervous edge, because real money is on the line. You write a check for thousands of dollars before you own anything, and the natural worry is: what if this deal falls apart? Do I lose it?

The short answer is that your earnest money is far safer than most buyers fear, as long as your contract is written correctly and you understand the contingencies protecting you. But because our market straddles the Columbia River, the rules aren't identical on both sides. A deal in Alameda or Sellwood-Moreland follows Oregon's framework. A deal in Camas or Felida follows Washington's. Here's exactly how each one works, and what it means for your deposit.

What earnest money actually is

Earnest money is a good-faith deposit you put down when your offer is accepted. It tells the seller you're serious enough to take the home off the market while you complete your inspections, appraisal, and loan.

It is not an extra fee. When the sale closes, your earnest money is applied toward your down payment and closing costs, so it becomes part of what you were going to pay anyway. It only becomes a point of tension when a deal doesn't close.

In the Portland-Vancouver metro, earnest money typically runs 1% to 3% of the purchase price. On the homes I see most in this market, that looks like:

• A $489,000 Vancouver home: roughly $4,890 to $14,670
• A $525,000 Portland home: roughly $5,250 to $15,750
• A $750,000 move-up home: roughly $7,500 to $22,500
• A $1.2 million luxury home: roughly $12,000 to $36,000

In competitive pockets — and Clark County is still moving faster than Portland right now, with homes going in roughly 18 days versus about two weeks on the Oregon side — buyers sometimes put down more to make an offer stand out. That's a strategy worth discussing, because a larger deposit is a stronger signal but also more money at stake if something goes wrong.

Who holds the money

In both states, you don't hand the check to the seller. Your earnest money goes to a neutral third party — an escrow or title company — that holds it in trust until closing or until both sides agree on where it goes. In Oregon, the OREF sale agreement generally calls for the deposit to be delivered into escrow within a few business days of acceptance.

That neutral holder matters. It means neither you nor the seller can unilaterally grab the funds if a dispute comes up. The money sits safely until the transaction closes or the two parties (or, if it comes to it, a mediator, arbitrator, or court) sort out who's entitled to it.

The contingencies that protect your refund

This is the part every buyer needs to understand: contingencies are what get your earnest money back.

A contingency is a condition written into your contract that lets you cancel and recover your deposit if it isn't met. The common ones in our market are:

• Inspection contingency — you can walk away if the inspection turns up problems you're not comfortable with
• Financing contingency — you're protected if your loan falls through
• Appraisal contingency — you have options if the home appraises below your offer price (I cover this in detail in my post on what happens when a Portland or Vancouver appraisal comes in low)
• Sale-of-home contingency — protection if you need to sell your current home first

If you cancel while a valid contingency is still in force and you follow the contract's notice requirements, you get your earnest money back. Where buyers get into trouble is walking away after contingencies have been satisfied or waived, or simply changing their mind. That's when the deposit is at risk. Buyers who are just getting started often pair this with understanding their upfront cash, which I break down in my Portland and Vancouver down payment assistance guide.

Oregon: the OREF contract controls

Oregon does not have a statute that caps how much earnest money a seller can keep. Instead, the disposition is governed by the terms of your sale agreement — for most residential deals, the Oregon Real Estate Forms (OREF) sale agreement.

Under that framework, earnest money generally functions as liquidated damages — an amount both sides agreed up front would fairly compensate the seller if the buyer defaults without a valid reason. In most cases, keeping the earnest money is the seller's sole remedy; Oregon's standard OREF form typically does not let the seller also sue the buyer for specific performance or additional damages beyond the deposit.

Because there's no statutory percentage cap, the specific terms of your agreement carry real weight. That's exactly why the fine print matters, and why you want someone reading it with you before you sign.

Washington: the 5% cap

Washington puts a number in the law. Under RCW 64.04.005, a written purchase agreement can make the forfeiture of earnest money to the seller the seller's "sole and exclusive remedy" when a buyer fails, without legal excuse, to complete the purchase — and that provision is valid and enforceable regardless of whether the seller suffered any actual damages.

But there's a ceiling. The statute says the amount forfeited under that automatic-enforceability provision "may not exceed five percent of the purchase price."

On the homes we see most, that 5% cap looks like:

• $489,000 Vancouver home: up to $24,450
• $525,000 home: up to $26,250
• $750,000 home: up to $37,500
• $1.2 million home: up to $60,000

A deposit larger than 5% isn't automatically forfeitable under this statute — anything above that line falls back to common-law rules, where a court looks at whether the amount is a reasonable estimate of damages. In practice, most Washington earnest money deposits sit well under the 5% line, so this cap functions as a protective ceiling for buyers.

What happens when both sides claim the money

Sometimes a deal collapses and both the buyer and seller believe they're entitled to the earnest money. Because a neutral escrow company holds the funds, it won't release them to either side without agreement or a legal determination.

Both Oregon and Washington contracts typically include dispute-resolution steps — often mediation first, then arbitration or court — to settle who gets the deposit. These disputes are usually about a few thousand dollars, so the practical goal is almost always to resolve them quickly and cheaply rather than litigate. Getting the contract and the contingency notices right on the front end is what keeps you out of these fights in the first place.

The bottom line for buyers and sellers

If you're buying, your earnest money is protected as long as your contingencies are in place and you act within their deadlines. Put down enough to make your offer credible, but understand exactly what you're risking if you waive protections to win a competitive home.

If you're selling, earnest money is your assurance that a buyer is committed — and, depending on the contract and the state, your compensation if they walk without cause.

Every transaction is different, and the amount that makes sense for your offer, the contingencies you keep or waive, and the exact language protecting your deposit all depend on your situation. That's precisely the kind of thing I walk my clients through before we ever write an offer or accept one.

Frequently Asked Questions

How much earnest money should I put down in Portland or Vancouver?

Most buyers in the metro put down 1% to 3% of the purchase price, so roughly $5,000 to $16,000 on a home in the $500,000 range. In faster-moving areas like Clark County, a larger deposit can strengthen a competitive offer, but it also means more money at stake if the deal falls through without a contingency to protect you.

Can I get my earnest money back if my financing falls through?

Yes, if your contract includes a financing contingency and your loan is denied within the contingency period, your earnest money is generally refundable. The protection depends on the contingency being written into the agreement and on you following the notice and deadline requirements, which is why the contract details matter.

Who holds the earnest money in Oregon and Washington?

In both states, a neutral third party — an escrow or title company — holds your earnest money in trust, not the seller. The funds stay there until closing or until both parties agree on where the money goes, so neither side can grab it unilaterally if a dispute arises.

What is the most a seller can keep in Washington?

Under RCW 64.04.005, a purchase agreement can make earnest money forfeiture the seller's sole and exclusive remedy, but the amount forfeited under that provision cannot exceed 5% of the purchase price. Oregon has no equivalent statutory cap, so the disposition is governed by the terms of your OREF sale agreement.

Is earnest money the same as a down payment?

No, but it's not lost money either. Earnest money is a good-faith deposit made when your offer is accepted, and at closing it's credited toward your down payment and closing costs. It only becomes separate from your down payment if the deal falls apart and there's a dispute over who keeps it.

Thinking through an offer?

Your earnest money is safer than most buyers fear and more strategic than most sellers realize — but the protection lives in the details of your contract, and those details differ across the Oregon-Washington line. If you're weighing how much to put down, which contingencies to keep, or what a deposit really commits you to, I'm happy to walk you through it for your specific situation. Reach out anytime.

This article is general information, not legal or tax advice. Rick Sadle is a licensed real estate broker, not an attorney or CPA. Earnest money terms, contingencies, and dispute rules depend on your specific contract and situation — review the details with your agent and, where appropriate, a qualified attorney before you sign.

About Rick Sadle

Rick Sadle is the Principal Broker and CEO of The Sadle Home Selling Team at Keller Williams Realty Professionals, serving the Portland, Oregon and Vancouver, Washington real estate markets. With more than 20 years of real estate experience, over 3,500 homes sold and more than $1 billion in team sales volume, Rick is one of the Portland area's most experienced real estate professionals. He is also a weekly real estate expert on KXL 101 FM, where he discusses the Portland and Vancouver housing markets, mortgage rates, housing trends and the economy. Rick is an Oregon-licensed Principal Broker and Washington-licensed Broker.

Sources

• Washington State Legislature — RCW 64.04.005, "Liquidated damages—Earnest money deposit—Exclusive remedy—Definition"
• Harris Sliwoski LLP — Earnest Money Deposits in Oregon Real Estate
• Harris Sliwoski LLP — Can You Back Out of an Oregon OREF Agreement?
• Oregon Real Estate Agency — Buyer Agreements and Listing Agreements law and rule overview