Are you unsure how much earnest money to put down on a home in Ann Arbor or what happens to that deposit if plans change? You are not alone. As a first-time buyer, it is normal to have questions about how deposits work, who holds the funds, and when you can get them back. In this guide, you will learn the essentials of earnest money in Michigan, what is customary around Ann Arbor, and how to protect your deposit from offer through closing. Let’s dive in.
Earnest money basics
Earnest money is your good-faith deposit that accompanies an offer to buy a home. It shows the seller you are serious and gives partial security if a buyer later defaults. If the sale closes, the deposit is usually applied to your down payment or closing costs.
In Michigan, the purchase agreement controls how earnest money is handled. There is no separate statutory deposit. Your rights are defined by what you and the seller agree to in the contract, including deadlines and contingencies. Read those terms closely and follow them.
How much in Ann Arbor
There is no fixed rule for deposit size. In many cases, buyers offer about 1 to 3 percent of the price or a flat amount like 1,000 to 5,000 dollars. Ann Arbor demand can run higher than average because it is a university market, so stronger offers sometimes include larger deposits, often 3 to 5 percent.
For lower-priced or less competitive homes, sellers may accept smaller amounts, such as 1,000 to 3,000 dollars. Align your deposit with property competitiveness, your comfort with risk, and your available cash. Your agent can advise what is customary by neighborhood and price point.
Who holds your deposit
In Michigan, earnest money is typically held by:
- A title or escrow company
- A real estate broker’s trust account
- Less commonly, an attorney escrow account
License rules in Michigan require that client funds be placed in properly maintained trust or escrow accounts with accurate records. Many buyers prefer a title company because it already coordinates closing disbursements. Always get a written receipt showing the amount, date, holder, and reference for your file.
Keep in mind that escrow accounts are regulated but not insured like a personal bank account. Using a licensed, reputable title company or broker reduces risk. Your contract should spell out who holds funds and when they can be released.
When you can get it back
Your deposit is usually refundable if you cancel within a valid contingency period and follow the contract’s notice steps. Common refundable situations include:
- You cancel within the inspection period per contract requirements
- Your financing contingency is not met and you provide the required notice and documentation
- Title is not clear and the contract allows cancellation
- The seller breaches the agreement
Processing is not always immediate. Expect days to weeks for the escrow holder to confirm terms and release funds.
When you could lose it
Earnest money can be forfeited if you default without a contractually permitted reason. Common non-refundable outcomes include:
- You walk away after contingencies expire without a contract-based reason
- You fail to close and the contract does not protect you
Many Michigan contracts include a liquidated damages clause that allows the seller to keep the deposit as the sole remedy if the buyer defaults. The specific language in your agreement controls what happens.
Contingencies explained
Contingencies are contract clauses that let you cancel if certain conditions are not met. Examples include inspection, financing, appraisal, and title. Each contingency has a deadline and usually requires written notice to cancel.
To protect your deposit:
- Track every deadline from day one
- Send written notices on time and in the format the contract requires
- Keep copies of all communications
Timeline from offer to closing
Here is how earnest money typically flows in Ann Arbor purchases:
- Offer submitted: You include an earnest money amount in your offer. Some buyers deliver it with the offer, others within a short period specified in the contract.
- After acceptance: The contract states who holds the funds, whether there are staged deposits, contingency deadlines, and the closing date.
- During contingencies: You complete inspections, finalize financing, and meet other milestones. If you need to cancel under a contingency, you must notify in writing by the deadline.
- Closing: If the sale completes, the deposit is applied to your purchase costs.
Smart strategies for first-time buyers
Earnest money is one lever among many. In multiple-offer situations, a larger deposit can signal commitment, but it does not guarantee acceptance. Pair it with other strengths:
- Shorten the inspection period if you are comfortable with the pace
- Present strong financing documentation
- Match the seller’s preferred timeline when possible
Avoid waiving contingencies without fully understanding the risk. A larger deposit plus waived protections increases potential loss if the transaction fails.
Protect your deposit
Use these practical checks to keep your funds safe and your options clear:
- Confirm in writing who will hold the deposit and where it will be kept
- Ask for a receipt showing amount, date, and the escrow holder’s details
- Review whether the contract calls for staged deposits and mark those dates
- Track inspection, appraisal, financing, and title deadlines from the start
- Understand any liquidated damages clause and what counts as default
- Ask how and when the escrow holder disburses funds
- Check with your lender on how they verify earnest money and whether they have rules about deposit sources and timing
Ann Arbor offer examples
These scenarios show how deposit outcomes depend on contract terms and timing:
- Scenario A - refundable: You find a major issue during the inspection period. You cancel in writing before the deadline. Your deposit is returned, subject to standard processing time.
- Scenario B - forfeited: You waive inspection to compete, then walk away for a non-contract reason. You likely forfeit the deposit, based on the agreement’s default provisions.
- Scenario C - mixed: Your financing falls through after the financing contingency deadline and you do not provide denial documentation as required. A dispute may arise and you risk forfeiture.
Ann Arbor amount cues
Use these quick cues to size your deposit for Washtenaw County homes:
- Less competitive listing: Consider 1,000 to 3,000 dollars if consistent with local norms and price
- Average competitiveness: Around 1 to 3 percent of purchase price
- Multiple-offer listing: Consider 3 to 5 percent, paired with tight timelines and strong financing
Your exact amount should match your cash flow, risk comfort, and the home’s market dynamics. Your agent can help you align with neighborhood expectations.
Key takeaways
- Earnest money is contract-driven. Your rights depend on the purchase agreement.
- Deposits in Ann Arbor often range from 1 to 3 percent or 1,000 to 5,000 dollars, with higher amounts for hot listings.
- Use licensed escrow holders, get receipts, and keep everything in writing.
- Meet every contingency deadline to preserve refund rights.
- A bigger deposit helps, but it works best with shorter, clear timelines and strong financing.
If you want help tailoring your deposit strategy to a specific Ann Arbor neighborhood or price point, reach out. You will get clear, step-by-step guidance from offer to closing. Connect with Jay Gingell to get started.
FAQs
How much earnest money is typical in Ann Arbor?
- Many buyers offer 1,000 to 5,000 dollars or about 1 to 3 percent of price, with 3 to 5 percent common on competitive listings.
Who usually holds the earnest money in Michigan?
- A licensed title or escrow company or a broker’s trust account commonly holds the deposit, documented by a written receipt.
When is earnest money refundable in Michigan home sales?
- It is typically refundable if you cancel within valid contingency periods and follow the contract’s written notice requirements.
Can I lose my earnest money if a sale falls through?
- Yes, if you default or miss deadlines without a contract-based reason, the seller may claim the deposit as liquidated damages.
Are escrow accounts insured like bank accounts?
- Escrow accounts are regulated but not insured like personal checking; choose a reputable, licensed holder and keep written records.
How long does an earnest money refund take?
- It varies by escrow holder and whether a dispute exists; expect days for simple cases and weeks if review or agreement is needed.