Buying in Durham and wondering how earnest money really works? You are not alone. That first deposit can feel confusing, and you want to be sure you are protected while still writing a winning offer. In this guide, you will learn what earnest money is, how it is handled in California, typical deposit sizes around Durham, and smart ways to keep your funds safe. Let’s dive in.
Earnest money basics in California
Earnest money, often called an EMD, is a good-faith deposit you give after a seller accepts your offer. It shows you are serious and is typically credited toward your down payment or closing costs at closing.
In California, the purchase contract and escrow instructions control how the deposit is held and released. Standard California Association of Realtors forms are commonly used and outline the deadline to deposit funds, contingency timelines, and how disputes are handled.
Escrow or a title company usually holds your deposit. They follow written instructions from both parties and will not release funds without mutual agreement or a court or arbitrator order.
How deposits work in Durham
In Durham and much of Butte County, deposits are typically placed with a neutral escrow or title company named in your purchase contract. Your agent will confirm the escrow holder and how to deliver funds.
You will generally be asked to wire the deposit or provide a cashier’s check within a few days of acceptance. The exact timeline and amount are set in your offer and confirmed by escrow instructions.
At closing, your earnest money is applied to your purchase. If the sale does not close, the contract and contingency status determine whether your deposit is refundable.
How much earnest money to offer
There is no single correct number. Across many California markets, a common starting point is 1 to 3 percent of the purchase price. In quieter or rural areas like parts of Butte County, flat deposits in the low thousands are also common.
The right amount depends on local competition, the home’s price, your financing strength, and the seller’s expectations. A larger deposit can make your offer more attractive, but it can increase risk if you later remove contingencies and back out.
Talk with your local agent about what recent Durham sales are showing so you can calibrate your deposit to the current market.
Refundability and contingencies
Your deposit is usually refundable while your contingencies are in place and you follow the contract’s timelines and notice rules. Common buyer protections include:
- Inspection contingency
- Loan or financing contingency
- Appraisal contingency
- Title and document review contingencies
- Sale-of-home or other specific contingencies
If you remove contingencies in writing or miss a deadline, your deposit may become nonrefundable. If you then cancel without an allowed reason, the seller may be entitled to the deposit as liquidated damages under the contract.
Deadlines you must track
- Initial deposit due date. Standard forms often require the EMD within a few days of acceptance. Mark this date and get confirmation from escrow when funds arrive.
- Inspection window. Complete inspections and decide whether to request repairs or cancel within this period.
- Appraisal and loan dates. If financing or appraisal issues arise, you must notify the seller within the contract timelines to preserve your deposit rights.
- Written notices. Use the required written forms for removing contingencies or cancelling. Verbal notices are not enough.
Make a strong, safe offer
- Size your deposit thoughtfully. A modest increase can signal strength without overexposing you.
- Keep key protections. Shorten contingency periods rather than removing them, unless you are fully confident in your position.
- Align timing with the seller. Offer a quick close or flexible possession to offset the need for a very large deposit.
- Consider an escalation clause. If appropriate, this can help you compete without inflating the EMD.
Wiring and escrow safety
Wire fraud is a real risk. Protect your deposit by following these steps:
- Confirm the escrow company’s name and phone number independently, then call to verify wiring instructions.
- Never rely on emailed wiring changes. Treat unsolicited updates as suspicious and re-verify by phone.
- Use traceable funds like a wire or cashier’s check and request a receipt from escrow.
If you need your deposit back
If you are cancelling under a valid contingency, give written notice within the deadline and follow any required steps in the contract. Provide supporting documents, such as an inspection report, lender denial, or appraisal, if requested.
Escrow typically needs written instructions from both parties to release funds. If there is a disagreement, the money may be held until mediation, arbitration, or a court order resolves the dispute.
Quick buyer checklist
- Get full lender pre-approval before you shop.
- Confirm the escrow holder and deposit method in your offer.
- Track all contingency deadlines on a calendar.
- Keep everything in writing, including notices and receipts.
- Consult your agent or an attorney if a dispute arises.
Work with a local guide
Durham is a close-knit, rural-suburban market where norms can vary by property type and season. You gain an edge when your agent knows what sellers here expect and how escrow companies handle deposits locally.
If you want a confident, low-stress path from offer to keys, partner with a local advisor who can right-size your deposit, protect your timelines, and coordinate escrow from start to finish. When you are ready, reach out to Lora Trenner for local guidance tailored to your goals.
FAQs
What is earnest money in a California home purchase?
- It is a good-faith deposit you pay after offer acceptance, held by escrow or title, and credited to your purchase at closing under the contract and escrow instructions.
How much earnest money should I put down in Durham, CA?
- Many buyers use 1 to 3 percent of price, or a flat amount in the low thousands for less-competitive situations. Ask your local agent for current norms.
Is my earnest money refundable if my loan is denied?
- If you have a valid loan contingency and you notify the seller within the contract timeline with any required documentation, the deposit is generally refundable.
Who holds the earnest money in Butte County transactions?
- A neutral escrow or title company usually holds it, as stated in your purchase contract. Some deals use a brokerage trust account.
When does earnest money become nonrefundable in California?
- After you remove contingencies in writing or miss deadlines, cancelling without a contract-allowed reason can put your deposit at risk as liquidated damages.
What if the appraisal in Durham comes in low?
- If you have an appraisal contingency, you can negotiate, pay the difference, or cancel within the timeline and typically recover your deposit if you follow notice rules.
