Wayne nailed this one. Typical in Chicago is 5% of the purchase price. Having said this I have negotiated transactions with level amounts that were below this threshold. The amount is an expression of several things - sincerity and capacity. So a closing tomorrow for a $1.325m purchase had a flat amount of $50k and one set to close today for $282k had 5% down.
Most contracts express earnest money in two payments. You have the amount put down upon executing contract (often $1k). The second amount typically is expressed either at a time specific or, as I prefer, two business days after attorney review is completed. And now that I think of it, since attorney review for the larger purchase didn't complete until last Friday the remainder of earnest money will simply be expressed in a wire transfer to the title company for closing.
There are different explanations as to what earnest money is - some say it is a down payment and others say it is escrow. Both are pretty true. You also may look to it through the prism of what the words mean - this is money in earnest establishing a bridge to certainty on the seller's part as to you, the buyer's, sincerity to make and follow through to purchase.
It is also part of the legal contract and is something you might discuss with your attorney. In terms of who sets the amount - it is part of the negotiation and stems from your conversation with your real estate professional and then cobbled together with the seller and his/her real estate agent.
Best of luck,
The Real Estate Lounge Chicago of @properties
Expertise in Contract Negotiation, Buyers' Representation and Luxury Home Marketing
Best of Luck
$5 is sufficient EMD for a transaction. Actually, $1 is. It is just a legal amount paid to hold the seller from selling to someone else. Offer as little as you feel comfortable offering that you could walk away from.
Sellers often think that it goes to them, but that rarely ever happens. It will go to court before that and then the attorneys get it.