You found a home you love in Farmington and you are ready to write an offer. Then your agent mentions “earnest money.” If you are not sure how much to put down or what could put that money at risk, you are not alone. In this guide, you will learn what earnest money is, how it works in Michigan, typical amounts in Farmington, when it is refundable, and smart steps to protect it so you can write a confident offer. Let’s dive in.
What earnest money is
Earnest money is your good‑faith deposit that you deliver with an offer to buy a home. It shows the seller you are serious. If the sale closes, the deposit is applied to your down payment and closing costs.
It also gives the seller limited protection if a buyer defaults. Whether a seller can keep the deposit depends on the signed contract and whether you met contingency deadlines. Your agent will help you understand those terms before you commit.
Typical amounts in Farmington
Common practice in Farmington and across Oakland County is either a flat amount or a percentage of the purchase price. Typical ranges are about 1% to 3% of the price. In a competitive situation you might offer more. In a slower market you might offer less.
- Example: On a $350,000 home, 1% is $3,500. Two percent is $7,000.
- Your exact amount should balance strength with risk tolerance. Ask your agent what is customary for your price point and neighborhood.
How deposits are handled in Michigan
In Michigan, earnest money is usually held in a neutral escrow or trust account until closing. The holder is often a title company, a closing attorney, or sometimes a broker. Your signed purchase agreement will name the escrow holder and spell out how and when funds must be delivered.
- Delivery: Check or wire transfer are common. Larger deposits are often wired.
- Receipt: Always get a receipt and written confirmation when funds are deposited into escrow.
- Interest: Escrowed earnest money usually does not earn interest for the buyer. Policies vary by escrow holder and the contract.
Timelines you should expect
Your purchase agreement will set clear timelines. Missing them is a common cause of disputes, so put them on your calendar.
- Deposit due: Often within 24 to 72 hours of offer acceptance.
- Inspection period: Typical starting point is 7 to 10 days from mutual acceptance.
- Financing deadline: Commonly 21 to 30 days for mortgage approval, depending on your lender.
When earnest money is refundable
Your deposit is usually refundable if you end the contract under a valid contingency within the stated deadline and in the way the contract requires. Common buyer protections include:
- Inspection contingency. You can cancel within the inspection window if you are not satisfied and you give proper notice. You can also negotiate repairs or credits.
- Financing contingency. If you cannot obtain your loan despite good‑faith efforts and proper notice, the deposit is typically refundable.
- Appraisal contingency. If the appraisal comes in below the price and you cannot reach a new agreement, you can usually cancel and recover your deposit.
- Title contingency. If the seller cannot deliver clear title and the defect is not resolved, you can terminate and receive a refund.
- Sale‑of‑home contingency. If allowed in your offer, you can cancel if your home does not sell within the agreed time frame. This can weaken an offer in a hot market.
If the seller breaches the contract, buyers are typically entitled to a refund of earnest money and may have other remedies. If a buyer breaches after contingencies are satisfied or waived, the seller may be able to keep the deposit as liquidated damages if the contract says so. Always follow the contract’s notices and deadlines in writing.
How to protect your deposit
A strong offer and a safe process can go hand in hand. Use these steps to reduce risk.
- Get a written mortgage pre‑approval before you shop. It strengthens your offer and keeps financing timelines realistic.
- Right‑size the deposit. Choose an amount that signals commitment without stretching beyond your comfort level.
- Keep standard timelines. Start with inspection at 7 to 10 days and financing at 21 to 30 days, then adjust based on lender guidance and property complexity.
- Choose a reputable title company. Confirm where the deposit will be held and how you will receive deposit confirmation.
- Verify wiring instructions by phone. Call the title company using a trusted number you locate independently. Wire fraud is a real risk. Never act on wiring instructions received only by email.
- Document everything. Keep receipts, email notices, and lender updates. Written records help resolve questions quickly.
When to consider a stronger deposit
In a seller’s market or on a highly desirable Farmington home, a larger deposit can make your offer more appealing. You can also shorten contingency timelines if you have done your homework with inspections and financing. Just remember, increased strength often raises your risk. Make every change with eyes open and clear advice from your agent and lender.
Mistakes that put deposits at risk
Avoid these common missteps that can lead to disputes or forfeiture.
- Missing contingency deadlines or sending notices late.
- Waiving inspection, appraisal, or financing without understanding the risk.
- Failing to verify wire instructions by phone before sending funds.
- Assuming the seller must complete repairs that were never agreed to in writing.
- Not reading the contract’s escrow and release language closely.
Quick buyer checklist
Use this short list as you prepare to write offers in Farmington.
- Get pre‑approved in writing by a lender.
- Decide your earnest money amount and backup strategy.
- Confirm who will hold escrow and how to deliver funds.
- Set inspection and financing deadlines you can meet.
- Verify wiring instructions by phone before any transfer.
- Save receipts and send all contract notices in writing.
How we help you move with confidence
You deserve clear guidance at every step. From sizing your earnest money and choosing timelines to coordinating title and lender communications, your agent should help you write a smart, safe offer. If you are also weighing updates or condition issues that surface during inspection, design‑savvy advice can help you decide what to negotiate and what to plan post‑close. That way you keep your deposit protected while positioning your new home for enjoyable living and strong long‑term value.
Ready to talk strategy for your Farmington purchase? Connect with Shelly Rae Linnell for clear, step‑by‑step guidance on offers, contingencies, and design‑forward planning after you close.
FAQs
How much earnest money do Farmington buyers usually put down?
- Typical deposits are about 1% to 3% of the purchase price, or a flat amount that fits your price range and market conditions. Your agent can guide the right number for your offer.
Is earnest money refundable after a Farmington home inspection?
- If you cancel within the inspection period following the contract’s rules, the deposit is usually refundable. Missing deadlines or waiving the contingency raises risk.
Who holds earnest money for Farmington purchases?
- A neutral escrow holder, often a title company, closing attorney, or broker trust account, keeps funds until closing or release under the contract.
What if my lender denies the loan after I make an offer in Farmington?
- With a valid financing contingency and timely notice, you can typically cancel and receive a refund. If you waived that contingency, the deposit is at higher risk.
How soon do I need to deliver my deposit in Michigan?
- Most contracts require delivery within 24 to 72 hours of acceptance. Your purchase agreement will set the exact deadline and delivery method.
When is it smart to offer a larger deposit in Farmington?
- Consider a larger deposit when competition is high and the home is in strong demand. Balance competitiveness with your comfort level and contingency protections.