Non-refundable earnest money: the Additional Clause Addendum, line by line
Every listing agent in Arizona has heard some version of this question from a buyer's agent: "My client wants to sweeten the offer with non-refundable earnest money. How do we do it?"
Most agents guess. Some call their broker. A few make up custom language and hope escrow doesn't push back.
None of that is necessary. The Arizona Association of Realtors already wrote the clause. It sits on lines 28-32 of the Additional Clause Addendum, and it's been there since well before the current November 2025 revision. Here's what it actually says, and how it actually works.
The clause, verbatim
Additional Clause Addendum (Rev. 11/2025), lines 28-32:
> NON-REFUNDABLE EARNEST MONEY: Buyer's earnest money shall be non-refundable unless Buyer elects to cancel pursuant to Section 6 of the Contract, the Contract is cancelled pursuant to the Risk of Loss provision or escrow fails to close due to Seller's breach of contract. Buyer acknowledges that Buyer's earnest money shall be non-refundable even if the Premises fail to appraise for the sales price or the loan contingency is unfulfilled, unless otherwise prohibited by federal law.
That's it. Five lines. Pre-printed. Initialed by both parties to activate.
No custom language. No addendum-to-the-addendum. No "let me draft something." If you want the buyer's earnest money to be non-refundable in a Residential Resale purchase, this is the mechanism.
What the clause actually does
Read it slowly. The default under this clause is that earnest money is non-refundable. Then it names three specific escape hatches — the only three situations where the buyer still gets the earnest money back:
1. Buyer's Section 6 inspection cancellation. The buyer's inspection period, and the buyer's right to cancel during it, remains intact. Non-refundable earnest money doesn't override the buyer's right to walk during the inspection window. That's a critical detail agents miss.
2. Risk of Loss. If something happens to the property between contract and close (fire, flood, material damage), the contract's Risk of Loss provision governs. Non-refundable earnest money doesn't force the buyer to close on a burned-down house.
3. Seller's breach. If the seller fails to perform, the buyer gets their earnest money back. This one is obvious in hindsight but worth naming.
Everything else is on the buyer. Read the second sentence again:
> Buyer acknowledges that Buyer's earnest money shall be non-refundable even if the Premises fail to appraise for the sales price or the loan contingency is unfulfilled…
Appraisal comes in low? Buyer's problem. Loan falls through? Buyer's problem. Buyer changes their mind after inspection? Buyer's problem — and they lose the earnest money.
That's what makes non-refundable earnest money a real signal in a competitive offer situation. The buyer is putting real skin in the game beyond just the inspection period.
The escape hatch agents forget
The single most common mistake I see: agents assume "non-refundable" means the buyer has forfeited the earnest money from day one. They advise sellers to celebrate. Then the buyer cancels during the inspection period — legally and cleanly — and gets the earnest money back.
The seller is furious. The listing agent is scrambling. Everyone forgot Section 6.
Non-refundable earnest money under the ACA does not shorten or eliminate the inspection period. The buyer retains their full inspection-period cancellation right. What "non-refundable" changes is everything after the inspection period ends.
If your seller wants the buyer to also give up the inspection cancellation right, that requires a different form and a different conversation. It's rare, buyers almost never agree to it, and if they do you're in unusual-transaction territory and should be talking to your broker.
When to use it, when not to
Good scenarios for non-refundable earnest money:
- Competitive multiple-offer situations where a buyer wants to stand out beyond price alone.
- Contingency-heavy offers where the buyer is trying to signal "I'm serious even though I have contingencies."
- Delayed closing arrangements where the seller is taking on some risk of the buyer walking mid-window.
Bad scenarios:
- First-time buyers who don't fully understand what they're waiving. This clause is enforceable; the buyer really does forfeit the earnest money for appraisal and financing failures. Make sure your buyer client understands that before they initial it.
- Very high earnest money amounts. Non-refundable earnest money is a proportionality trade — the higher the amount, the more you're asking the buyer to swallow if the deal falls through for reasons outside their control. A $5,000 non-refundable deposit on a $500,000 house is a light seasoning; $50,000 non-refundable is a much bigger commitment.
- Any transaction where the buyer is being pressured into it. If the buyer's agent is nudging them toward non-refundable earnest as a negotiation tactic they haven't fully thought through, that's a conversation worth having before signatures happen.
What this looks like in practice
The mechanic is:
1. Buyer's agent drafts the offer with the Additional Clause Addendum attached.
2. Line 28-32 of the ACA is initialed by both buyer and seller.
3. Contract goes to escrow.
4. Buyer's inspection period runs. Buyer either cancels (gets earnest money back) or accepts the property (earnest money is now committed).
5. If anything goes wrong after the inspection period ends — appraisal miss, financing collapse, buyer's remorse — the earnest money is forfeited to the seller.
Two lines of initials. That's the entire mechanism. No custom drafting, no negotiation over specific language, no lawyer involvement for a standard transaction. AAR did the work. Agents just have to know the clause exists and read it carefully with their client.
The broader point
Arizona's AAR forms library is deeper than most agents realize. Nearly every scenario an agent hits in a residential resale has a pre-printed clause somewhere in the standard forms — buyer contingency addendum, additional clause addendum, contract amendment, cure period notice, and the RRPC itself. The clauses are drafted by AAR's legal counsel. They've been tested in Arizona real estate practice for decades. They almost always beat custom language in enforceability and clarity.
The problem isn't that the forms don't cover the situation. The problem is finding the specific line, in the specific form, that answers the specific question — while the buyer's agent is waiting on a call back.
That's the exact gap reTEQ AI Broker fills for the brokerages we work with. Ask "how do I make earnest money non-refundable using the Additional Clause Addendum?" — get the answer with line 28-32 quoted verbatim and the ACA form open on the same screen, highlighted at those lines, cited to the current November 2025 revision. Same answer this blog post gave you, delivered in about two seconds inside your agent's browser.
If your team is asking these questions and the answer is going through your inbox, book a demo and I'll walk you through what an agent's screen looks like when reTEQ is in it.
Mike McGowan is CRO of reTEQ Inc. reTEQ AI Broker is Arizona real estate compliance answers, grounded in the actual AAR forms, statutes, and your brokerage's own policies. See more at reteq.ai
