Earnest Money in Australia: Essential Guide for 2025

In the fast-moving world of Australian real estate, earnest money has become a buzzword in 2025. As market conditions shift and legal standards evolve, understanding this upfront deposit is critical for anyone entering the property market—whether you’re a first-time buyer, a seasoned investor, or a seller seeking security.

What Is Earnest Money?

Earnest money, sometimes called a “good faith deposit,” is a sum paid by a buyer when making an offer on a property. It signals serious intent to purchase and provides reassurance to sellers. If the sale proceeds, this deposit is usually applied to the final purchase price. If the deal falls through due to buyer default, the seller may keep the deposit as compensation.

In 2025, Australian real estate contracts typically call for earnest money ranging from 0.5% to 2% of the property’s value, depending on local market conditions and the terms negotiated. For example, on a $900,000 Melbourne home, a buyer might put down $9,000–$18,000 as earnest money.

Recent Legal and Policy Updates

2025 has brought several notable changes to how earnest money is handled in Australia:

• Stricter Disclosure Rules: New national guidelines require agents and sellers to clearly disclose how earnest money is held and under what circumstances it is refundable.

• Escrow Protection: Most states now mandate that earnest money is held in a regulated trust or escrow account, preventing misuse or premature release of funds.

• Cooling-Off Periods: Expanded cooling-off rights in NSW and Victoria mean buyers have more time to reconsider, with earnest money refundable (minus a small administrative fee) if they withdraw within the statutory period.

• Digital Payment Options: Major agencies now accept earnest money via secure online payment platforms, streamlining the process and reducing risks of fraud.

These reforms aim to boost transparency and trust in property transactions, ensuring that both parties are protected during the crucial offer stage.

Why Earnest Money Matters in 2025

The Australian housing market remains competitive, especially in capital cities. Sellers want assurance that buyers are committed, while buyers need to demonstrate their seriousness without risking undue loss. Earnest money plays a pivotal role in balancing these needs.

• For Buyers: Putting down earnest money can make your offer stand out, especially in multi-offer situations. It shows you’re not just window-shopping, but genuinely ready to proceed.

• For Sellers: Earnest money reduces the risk of time-wasting and gives confidence that the sale is likely to go through. In the event of buyer default, it offers some financial compensation.

• For Agents: Clear earnest money arrangements streamline negotiations and reduce disputes, leading to smoother settlements.

Consider this recent example: In February 2025, a Sydney couple secured their dream apartment by offering a 2% earnest deposit, outbidding competitors who provided only the minimum 0.5%. Their higher deposit demonstrated strong intent, convincing the seller to accept their offer over others.

Tips for Navigating Earnest Money

• Negotiate Terms Upfront: Make sure the contract spells out exactly when and how earnest money is refundable. Typical contingencies include failed finance approval, unsatisfactory building inspections, or issues with the title.

• Insist on Escrow: Always ensure your deposit is held by a reputable third party—never pay earnest money directly to a seller or agent’s personal account.

• Know Your Rights: Take advantage of cooling-off periods and don’t be pressured to rush. If you withdraw for a valid reason within this period, you can recover most or all of your deposit.

• Keep Records: Retain all payment receipts and correspondence related to the earnest money for your records and peace of mind.

The Bottom Line

Earnest money is more than just a tradition—it’s a practical safeguard for buyers and sellers navigating Australia’s dynamic property market in 2025. With new legal protections and digital payment options, the process has never been more secure. Whether you’re making an offer or considering your next sale, understanding how earnest money works—and how to use it to your advantage—can make all the difference.