You found a home in Denver you love and you are ready to write an offer. Then your agent mentions earnest money. How much should you put down, where does it go, and how do you keep it safe? You deserve a clear, Denver‑specific answer before you wire a dollar.
In this guide, you will learn what earnest money is, typical deposit sizes in Denver, how the funds are held, when they are refunded, and when they may be forfeited. You will also get practical steps to protect your deposit and examples of common scenarios. Let’s dive in.
Earnest money basics in Denver
Earnest money, also called an earnest money deposit or good‑faith deposit, is money you put up when your offer is accepted to show you are serious and to temporarily secure the seller’s agreement to take the home off the market. If the sale closes, the deposit is credited toward your cash due at closing, such as your down payment or closing costs. It can also serve as security for the seller if you breach the contract and the seller’s entitlement is established by the contract or a legal decision.
It is not the full down payment. It is also different from any separate option or inspection fee used in some states. In Colorado, the contract to buy and sell sets out how earnest money is handled, the deadlines that apply, and the remedies if either party defaults.
How much is typical in Denver?
In a normal or balanced market, many Denver offers use deposits in the range of 1,000 to 5,000 dollars for lower‑priced homes, or roughly 1 percent of the purchase price as a rule of thumb. In a hot, competitive market with multiple offers, buyers often offer larger deposits, commonly 2 to 3 percent or more, or fixed higher amounts like 10,000 dollars to strengthen the offer. For higher‑priced listings, deposits are often expressed as a percentage, while lower‑priced homes may use a flat number.
Here are quick examples for context. On a 400,000 dollar home, 1 percent equals 4,000 dollars and 3 percent equals 12,000 dollars. On a 700,000 dollar home, 1 percent equals 7,000 dollars and 2 percent equals 14,000 dollars. The right number for you depends on market competitiveness, any signals from the seller’s side, your cash reserves, and your offer type. Cash offers sometimes pair larger deposits with fewer contingencies, while contingent offers may keep earnest money lower.
Where your deposit is held
In most Denver transactions, a licensed title or escrow company holds the earnest money in an escrow account. Some brokerages hold funds in a broker trust account, especially if a title company has not been named yet. The purchase contract names the escrow holder and sets the deadline for delivery.
Title and escrow companies maintain fiduciary controls and are subject to regulation. Title insurance does not insure the earnest money itself, but established companies use internal controls and bonding that reduce the risk of misapplication. Colorado’s Division of Real Estate oversees broker trust‑account practices for licensees. As a buyer, you should confirm the named escrow agent before sending funds, deliver the deposit by the contract deadline, and get a written receipt showing the escrow is holding your deposit.
Protecting against wire fraud
Wire fraud attempts target real estate closings. Before wiring, call the title company at a phone number you look up independently, not a number from an email. Confirm the routing and account details with a live person. After you send funds, keep the wire confirmation and ask the escrow holder for a written receipt or ledger entry. These simple steps help protect your deposit.
Refunds, forfeitures, and deadlines
If you close, your earnest money is credited to you at settlement. If you do not close, whether you get it back depends on your contingencies and deadlines in the contract. Common buyer protections include inspection, financing, appraisal, and review of title or HOA documents, along with any other agreed‑upon contingencies such as the sale of your current home.
Each contingency has a deadline and notice requirement. To keep your protections, you need to provide the proper notice within the stated timeframes. If you default without an applicable contingency or miss a deadline, the seller may have the right to retain your deposit as damages if the contract allows it. Many Colorado contracts include procedures for mutual release, and escrow holders will usually only release funds with mutual written instructions or a valid court order. Keeping earnest money is not automatic, and disputes may go to mediation, arbitration, or court if parties cannot agree.
A practical playbook for Denver buyers
Use this checklist to choose a deposit that fits your goals and risk tolerance.
- Gauge the current market. If inventory is tight and multiple offers are common, consider a higher deposit. If conditions are balanced or favor buyers, a lower amount may be fine.
- Align with your cash plan. Your deposit is credited at closing, but it is tied up during the contract. Coordinate with your lender to confirm cash reserves.
- Match your strategy. If you need to stand out, increase the deposit and consider shorter, realistic contingency windows. If you are risk‑averse, keep a moderate deposit and maintain strong contingencies.
- Name a reputable escrow holder. Make sure the contract names a known title or escrow company to hold the funds. Verify wiring instructions by phone and get receipts.
- Track your dates. Put inspection, financing, appraisal, and title deadlines on your calendar. Timely notices protect your refund rights.
Common scenarios to expect
- Scenario A: You find major issues during inspection and cancel within the inspection timeline using the proper notice. You receive a full refund of your deposit.
- Scenario B: Your lender cannot issue final approval within the financing contingency window. You provide the required notice and your deposit is returned.
- Scenario C: You miss your financing contingency deadline and later cannot close. The seller may claim the deposit as damages, and the funds are released only after mutual instructions or a legal decision.
- Scenario D: After negotiations fall apart, both parties sign a mutual release to return or split the funds. The escrow holder releases the deposit per the written agreement.
What sellers look for in your deposit
Sellers view a larger earnest money amount as a sign of commitment. That can help your offer stand out when multiple offers are in play. At the same time, your risk increases if you shorten or waive protections. The best strategy balances show of strength with safeguards you can live with, given your financing, timing, and comfort level.
Work with a steady local guide
Earnest money is a small part of your overall budget, yet it carries real leverage and risk. The right plan depends on today’s Denver market, the property you want, and the terms you can meet with confidence. A calm, well‑timed approach protects your funds while keeping your offer competitive.
If you are weighing options, let’s talk through deposit amounts, contingency timelines, and escrow safety before you write. Reach out to T.J. Gordon for clear, researched guidance and steady execution from offer to close.
FAQs
What is earnest money in a Denver home purchase?
- It is a good‑faith deposit you pay after your offer is accepted to show commitment, held in escrow and credited to you at closing if the sale completes.
How much earnest money do buyers usually put down in Denver?
- Many offers use 1,000 to 5,000 dollars for lower‑priced homes or about 1 percent of the price, and in competitive situations buyers often offer 2 to 3 percent or higher.
Who holds earnest money in Colorado and is it safe?
- A title or escrow company usually holds it in an escrow account, sometimes a broker trust account; confirm the holder, verify wiring by phone, and get receipts to safeguard funds.
When is earnest money refundable to a Denver buyer?
- If you cancel within contract timelines under inspection, financing, appraisal, or other agreed contingencies and give proper notice, the deposit is typically returned to you.
Can a seller keep my earnest money if I back out?
- If you default without an applicable contingency or miss deadlines, the seller may be entitled to the deposit as damages under the contract, subject to release procedures or legal resolution.
Does earnest money reduce my down payment at closing?
- Yes, if the sale closes your deposit is credited toward your cash due at settlement, such as your down payment or closing costs.
How fast must I deliver earnest money after going under contract?
- The contract sets a specific deadline, often within a few days of acceptance, and failure to deliver on time can be considered a default under the agreement.
