When buying land, expect to put down earnest money of roughly 5% to 15% of the purchase price for an improved parcel and 15% to 30% for raw or undeveloped land. That is noticeably higher than the 1% to 5% typical on a home purchase, because vacant land is harder to resell, appraise, and finance, and sellers want more assurance the deal will actually close. The exact figure is almost always negotiable and depends on the type of land, the local market, and how you plan to pay.
Typical Ranges by Land Type
Improved land — parcels that already have utility connections, road access, or other basic infrastructure — usually calls for a deposit between 5% and 15% of the price. On a $150,000 improved lot, that works out to roughly $7,500 to $22,500 in earnest money.
Raw land pushes the range higher. Lenders view undeveloped acreage as riskier collateral, and sellers face more uncertainty about whether a buyer will follow through. Deposits of 15% to 30% are common, and some sellers of remote or unserviced acreage ask for more. A $50,000 raw parcel might require $10,000 to $15,000 upfront.
For smaller or lower-priced parcels, sellers sometimes drop the percentage math and request a flat amount instead. Flat deposits in real estate commonly land between $5,000 and $10,000 regardless of the total price.
By comparison, a standard residential home purchase usually involves 1% to 5% earnest money, with competitive markets pushing it higher. Land almost always sits above that baseline.
What Moves the Number Up or Down
The deposit in a land contract is negotiable, and a handful of variables decide where you and the seller end up.
- Market competition. In a hot market with multiple offers on the same parcel, a larger deposit makes your bid stand out. In a slow market, sellers may accept less rather than lose an interested buyer.
- How you’re paying. Cash buyers often negotiate lower deposits because their closings are quicker and carry no lender risk. If you need financing — especially for raw land, where loan approval is less certain — expect a seller to ask for more to offset the chance the loan falls through.
- Length of the due diligence period. A longer inspection or contingency window keeps the property off the market longer, which increases the seller’s risk. Sellers often want more earnest money in exchange.
- Property complications. Unclear boundaries, missing surveys, or potential environmental concerns can push the deposit up, because the seller recognizes you’ll need more time and more outs to investigate.
Contingencies That Keep the Deposit Refundable
How much you put down matters less if the contract lets you walk away and get it back when something legitimate goes wrong. Land deals carry risks a typical home sale does not, and the contingencies in your purchase agreement are what protect the money once it is sitting in escrow.
- Zoning. If you plan to build, a zoning contingency ties your purchase to confirming the land is zoned for that use, or to obtaining a rezoning approval by a set deadline. If the zoning can’t support your plans, you get your deposit back.
- Environmental. A Phase I Environmental Site Assessment checks for contamination from prior uses such as old fuel tanks, chemical spills, or polluted neighboring properties. It typically takes three to four weeks. This contingency lets you exit if the assessment turns up problems, protecting you from cleanup liability under the federal Superfund law.
- Soil and percolation test. If the parcel has no public sewer connection, you’ll likely need a septic system, and the soil has to drain well enough to support one. A perc test measures that. Tie the deposit to passing results and you can recover it if the land turns out to be unbuildable.
- Survey. A fresh survey may reveal that actual boundaries, acreage, or easements differ from what the seller described. A survey contingency lets you renegotiate or walk.
- Financing. If your lender denies the loan, this contingency returns your deposit. Loan denials are more common for land than for traditional home mortgages, so this one matters.
Every contingency comes with a deadline. Miss it — by failing to complete a soil test on time, for instance — and you may waive that protection and put the deposit at risk. Read every date in the agreement carefully.
One boundary worth knowing: most land contracts treat the deposit as liquidated damages if you breach the agreement without a valid contingency. That means the seller keeps the full deposit as their compensation, without having to prove actual losses. A few states cap that forfeiture — for example, at 3% or 5% of the purchase price for certain residential transactions — but those caps vary and often apply differently to vacant land than to homes. Local law controls, so ask your real estate attorney or agent how the clause in your contract would hold up in your state.
Delivering the Deposit Safely
Before you sign, make sure the money is in a checking or savings account you can move quickly, not tied up in a brokerage or retirement account. The contract will set a deadline for delivering the deposit, often 24 to 72 hours after the seller accepts your offer. Missing it can be treated as a breach.
If the deposit is large, check with your bank about daily wire transfer limits, which may need to be raised in advance. A proof-of-funds letter from your bank can also strengthen your offer during negotiations.
The deposit goes to a neutral third party — a title company, escrow agent, or real estate attorney — never directly to the seller. Keeping it in a fiduciary account protects the money until the contract conditions are met or the deal ends.1National Association of REALTORS®. Consumer Guide: Escrow and Earnest Money Wire transfers and cashier’s checks are the standard payment methods because they verify immediately. Title companies often reject personal checks because of clearing delays and the risk of insufficient funds.
Watch for wire fraud. Scammers monitor real estate transactions and send fake wiring instructions, often by impersonating a title company or attorney through a spoofed or compromised email. Money wired to a fraudulent account is typically unrecoverable. The FBI reported that business email compromise schemes, which include real estate wire fraud, caused over $2.4 billion in losses in a single year.2Federal Bureau of Investigation. Congressional Report on Business Email Compromise and Real Estate Wire Fraud Always verify wiring instructions by calling the title company at a phone number you obtained independently, not a number pulled from the email itself.
What Happens to the Money Later
At closing, your earnest money doesn’t disappear into the deal — it is credited back to you. On the federal Closing Disclosure form, the deposit shows up as a line item under amounts already paid by the borrower, reducing the cash you need to bring to the table.3Consumer Financial Protection Bureau. 12 CFR 1026.38 – Content of Disclosures for Certain Mortgage Transactions You can usually decide whether to apply it toward the down payment, closing costs, or other settlement charges. If you’re paying all cash, the deposit still reduces what you owe at closing; the escrow agent handles the accounting.
If the deal collapses and you and the seller disagree about who gets the money, the escrow agent can’t release it without written consent from both sides or a court order. Disputes that can’t be resolved sometimes end up in an interpleader action, where the escrow holder deposits the funds with a court and lets a judge decide. That process takes time and legal fees. Clear contingencies and deadlines in the original contract are the best defense against it.
If you walk away without a valid contingency and forfeit the deposit, the IRS treats that loss as nondeductible for the buyer — you cannot write it off on your tax return.4Internal Revenue Service. Tax Information for Homeowners That’s one more reason to size the deposit carefully and to make sure the contract gives you real outs before you sign.