Why Earnest Money Matters — And How Buyers Can Lose It
By Melissa K. Ford, Broker/Owner — Nome Sweet Homes

When you make an offer on a home in Nome, one of the first things you’ll hear about is the earnest money deposit. It’s a key part of every real estate transaction, yet many buyers don’t fully understand what it means — or how they could lose it.

Here’s a clear, local REALTOR® perspective on what earnest money is, why sellers require it, and the most common way buyers accidentally put that money at risk.

What Is Earnest Money?

Earnest money is a small deposit buyers put down when they write an offer. Think of it as a good-faith commitment — you’re showing the seller you’re serious and not tying up their home while you decide.

From the seller’s point of view, earnest money protects them from wasted time and lost market exposure. When a home goes under contract in a small market like Nome, it effectively comes off the shelf. Showings stop. Other potential buyers move on. If a buyer backs out without a valid reason, the seller may have lost weeks of opportunity.

Earnest money compensates the seller for that risk.

Why Finance Contingencies Matter

Most home purchases include a finance contingency (sometimes called a mortgage contingency). This is your safety net as a buyer.

A finance contingency gives you a set amount of time — typically 14–21 days — to get a firm loan commitment from your lender. This protects you if:

• Your loan is denied

• Your interest rate lock changes

• Your income or credit situation shifts

• The lender needs more documentation than expected

If you cannot secure financing within that timeframe, and you properly cancel the contract within the contingency window, your earnest money is returned.

This is why most buyers should never waive the financing contingency unless they truly have the cash to close.

When Buyers Lose Their Earnest Money

Here’s the big one:
If the finance contingency expires and you don’t cancel or request an extension in writing — you are now committed to buying the home.

If you fail to close because financing falls through after the deadline, the seller can legally keep your earnest money.

Common ways this happens:

• The buyer assumes their loan is “fine” and ignores lender requests

• The lender is delayed, but the buyer forgets to request a written extension

• The buyer’s preapproval wasn’t fully underwritten

• Something changes financially (new debt, job change, missed payments)

Without an active finance contingency, the buyer is buying the home whether the bank approves the loan or not — or they forfeit the deposit.

The Seller’s Perspective

For sellers, earnest money is not a “penalty.” It’s compensation for:

• Time off the market

• Missed showings and buyer opportunities

• Potentially lower offers if the home must be re-listed

• Extra mortgage, utility, and insurance costs during delays

In a small community like Nome, where inventory is limited and the selling season is short, those risks are real.

Bottom Line

Earnest money protects both sides:

• Buyers are protected by contingencies like financing, inspection, and appraisal.

• Sellers are protected from buyers who tie up their property without follow-through.

As always, my job is to help you navigate these deadlines, keep you protected, and ensure your earnest money stays safe.

If you’re thinking about buying or selling in Nome — or just want to understand your options — reach out anytime.

Melissa K. Ford
Broker/Owner, Nome Sweet Homes
907-304-2871 | [email protected]

Ready to start your home search? I’m here to help you make confident, informed decisions.