Earnest Money Forfeit Risk Calculator

Earnest money forfeits when contingencies fail. This calculator sizes probability-weighted loss.

EMD amount

Financing fail prob %

Inspection fail prob %

Title fail prob %

Expected forfeit loss

$60,365

Composite fail prob %

24.15%

Total risk exposure

$250,000

How the math works

Composite fail = 1 − (1 − financing) × (1 − inspection) × (1 − title). Expected loss = EMD × composite.

Aggressive bids with quick-drop contingencies improve win rate but raise forfeit risk. For a $250k EMD, a 25% composite failure probability carries $62k of expected loss — often more than the bid uplift from waiving contingencies earlier. Run the math before compressing timelines.

How to Use

Enter earnest money deposit.
Enter financing contingency probability fail %.
Enter inspection contingency fail %.
Enter title contingency fail %.
Read expected forfeit loss.

Frequently Asked Questions

Contingency categories?

Financing (loan approval). Inspection (physical condition). Title (clean title). Appraisal (value). Due diligence (documentation). Each triggers return of EMD if not satisfied. Failure to exit before contingency expiration = EMD forfeit.

Typical EMD size?

1-5% of purchase price. Commercial often 3-10%. Higher = stronger bid. EMD released from escrow at contingency clearance. Many hard money deposits by buyer within 7-10 days post-LOI.

Reducing risk?

Complete diligence before firm offer. Pre-qualify financing. Title review before EMD submission. Environmental Phase I before hard money. Each shifts diligence earlier to avoid EMD exposure.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.