Earnest Money, Contingencies, and Contract Basics in Arizona

Earnest money is a deposit that accompanies your offer, demonstrating your serious intent to purchase. In Arizona, it typically goes into escrow -- held by a neutral title and escrow company -- not to the seller directly. It sits there until closing, at which point it is applied to your down payment or closing costs.

The amount is negotiable and varies by purchase price and market conditions. There is no fixed rule, but a meaningful deposit signals to sellers that you are committed. A very small deposit in a competitive market can work against you.

Contingencies are conditions in the contract that must be met for the sale to proceed. The major ones in the Arizona AAR purchase contract are the inspection contingency (you can cancel based on inspection findings during the Due Diligence period), the financing contingency (loan denial lets you exit), and the appraisal contingency (if the home does not appraise at purchase price, you can renegotiate or cancel).

If you cancel within the terms of a valid contingency, your earnest money is returned. If you cancel outside those protections -- say, after your inspection period ends with no BINSR -- the seller may have a legitimate claim to your deposit.

Your earnest money is at risk if you cancel the contract without a valid contingency basis. Common risk scenarios: the inspection period expired and you did not submit a BINSR, your financing was approved but you walked away anyway, or you missed a contract deadline that triggered a default.

Arizona's contract has specific deadline structures. Know them. Your agent should track every date and remind you before each one passes. A missed deadline can shift the earnest money from protected to at-risk.

The Arizona Association of Realtors residential purchase contract is the standard form used in most Arizona transactions. It covers offer price, earnest money, inspection period length, financing terms, closing date, and the allocation of closing costs.

Addenda expand on specific situations: a buyer contingency addendum is used when you need to sell your current home first, an additional terms addendum handles anything not covered in the main form. Read both documents, not just the cover page.