Wondering how much earnest money you should put down in Grand Traverse County, or what happens to it if your deal falls apart? You are not alone. Earnest money can be straightforward once you know the rules and timelines. In this guide, you will learn what earnest money is, how much is typical here, when it is refundable, and how to protect your deposit from contract to closing. Let’s dive in.
Earnest money basics
Earnest money is a good‑faith deposit you offer when you submit a purchase offer. It shows the seller you are serious and gives the contract a clear remedy if the buyer unlawfully defaults. If the sale closes, the deposit is usually credited to your down payment or closing costs at settlement.
It is not the same as your inspection fee or an appraisal holdback. It is also different from a nonrefundable option fee, which must be clearly written into the contract if used. The purchase agreement should spell out the deposit amount, who holds it, and what happens if the deal is canceled.
Typical amounts in Grand Traverse County
In our market, buyers commonly choose between a flat-dollar deposit or a percentage of the purchase price. Flat deposits often fall in the range of $1,000 to $5,000. Percentage deposits are often 1% to 3% of the price. Both approaches are used across Michigan, and what is typical can shift with price point and market conditions.
If inventory is tight and multiple offers are common, you may see larger deposits or narrower refund conditions to stand out. In a balanced market, smaller deposits and broader buyer protections are more common. Ask your Grand Traverse County agent what is standard right now for your price range and property type so you can calibrate your offer.
Who holds the deposit
A neutral party holds your earnest money in a trust or escrow account. This is usually a title or escrow company, a closing attorney, or a brokerage escrow account. Your purchase agreement should identify the escrow holder and give instructions for delivery.
Always ask for a written receipt when you deliver funds. Confirm the account name and the escrow holder’s procedures for deposit, disbursement, and dispute handling.
Timing and how it is paid
Contract language controls the deadline, but here are common timelines:
- With your offer, or within 24 to 72 hours of acceptance
- At signing of the purchase agreement
Use traceable funds, such as a certified check or a wire per the escrow holder’s instructions, and keep proof of payment. Late or missed deposit deadlines can expose you to default risk, so set reminders and coordinate with your agent.
Refund rules and contingencies
Refundability depends on your contract contingencies and your timing. Common contingencies that preserve refund rights include:
- Inspection contingency. You can inspect and cancel or request repairs within the deadline. If you cancel on time under the contingency, the deposit is usually refundable.
- Financing or mortgage contingency. If you cannot secure financing despite timely and good‑faith efforts, you usually have refund rights if you meet the contract requirements by the stated date.
- Appraisal contingency. A low appraisal can trigger the right to renegotiate or cancel, depending on your contract.
- Title contingency. Unresolved title defects can allow you to cancel and recover your deposit.
- Sale‑of‑home contingency. If you need to sell your current home first, the contract must state that clearly and outline what happens if it does not sell in time.
For each contingency, your agreement should spell out the deadline, the process, and the remedy. Confirm whether your deposit is refundable under each scenario and note any nonrefundable fees that are separate from your deposit.
If a deal falls through
If you back out after your contingency deadlines, you may be in default. Many contracts include a liquidated damages clause that allows the seller to keep the earnest money if the buyer breaches. A seller may also consider other remedies, such as seeking specific performance or damages, depending on the agreement.
Most escrow holders require a written mutual release before they will disburse funds. If the parties cannot agree, the escrow holder may file an interpleader with the court so a judge can decide who gets the money. Your contract may also include mediation or arbitration provisions.
Michigan and local details
In Michigan, licensed real estate brokers must follow state rules for handling client funds in trust or escrow accounts. Earnest money rights and disputes are governed by your purchase contract and Michigan contract law. Courts look closely at the contract language and the facts of the case.
Locally, expect your title company to coordinate recording and closing logistics. The Grand Traverse County Register of Deeds maintains recorded documents, and the County Treasurer’s office tracks property tax status. Verifying tax and lien status is part of a clean title and typical closing conditions.
Because rules and practices can change, keep statements general and seek guidance from your agent or attorney on your specific contract.
Typical timelines
While every contract is unique, these ranges are common:
- Initial deposit: with offer or within 24 to 72 hours of acceptance
- Inspection period: often 7 to 14 days from acceptance
- Financing commitment: often 21 to 30 days
- Appraisal: scheduled after loan application, timing varies by lender
- Closing date: often 30 to 45 days after acceptance, negotiable
Buyer checklist
- Confirm the deposit amount and exact due date in your contract.
- Verify the escrow holder’s identity and delivery instructions, and get a written receipt.
- Use traceable funds and keep proof of payment.
- Track all contingency deadlines and know when your deposit could become nonrefundable.
- Ask how the escrow holder handles disputes, mutual releases, and interpleader.
Seller checklist
- Confirm the deposit amount and who is holding it.
- Make sure default remedies, such as liquidated damages, are clearly written in the contract.
- If buyers request extended deadlines or changes to contingencies, put amendments in writing and confirm any changes to the deposit.
- Monitor contingency dates with your agent and request updates in writing.
Hypothetical examples
Example 1: You offer $400,000 on a Traverse City home and include a 2% deposit ($8,000). During your 10‑day inspection period, you discover major roof issues. You cancel within the deadline under your inspection contingency. Your earnest money is usually refundable under the contract, and you receive it back after both parties sign a mutual release.
Example 2: You offer $300,000 with a $3,000 flat deposit. The appraisal comes in low and you do not have an appraisal contingency. You try to renegotiate, but the seller declines. If you cancel, you may be in default and risk losing your deposit under a liquidated damages clause, depending on your contract language.
These are hypothetical examples. Your agreement controls the outcome.
Protect your deposit
- Write it down. Make sure your contract lists the escrow holder, deposit amount, due date, and refund rules.
- Know your deadlines. Put inspection, financing, appraisal, and title dates on your calendar with reminders.
- Confirm receipts. Get a written receipt when you deliver funds and keep all documentation.
- Ask before wiring. Always call the escrow holder to confirm wiring instructions and avoid fraud.
- Clarify nonrefundable terms. If any part of your deposit is nonrefundable, make sure that is clearly stated and that you are comfortable with the risk.
Next steps
The best earnest money strategy balances a strong offer with clear protections. If you want local guidance on amounts, timelines, and contract language that reflects today’s Grand Traverse County market, we are here to help. Connect with the team at Traverse City Real Estate to talk through your goals and next steps.
FAQs
Is earnest money required for Michigan home purchases?
- No law requires it, but it is customary and negotiated in the purchase agreement. Many sellers expect a deposit, and the amount varies by property and market conditions.
How much earnest money is typical in Grand Traverse County?
- Buyers often choose a flat amount or 1% to 3% of the price. The right number depends on your price point and current market competitiveness.
When is earnest money refundable in a home purchase?
- Refundability depends on your contingencies and timing. If you cancel within a valid inspection, financing, appraisal, or title contingency, you usually have refund rights under the contract.
Who holds my deposit and is it safe?
- A title or escrow company, attorney, or brokerage trust account typically holds it. Ask for a receipt and confirm the escrow holder’s procedures for deposit, release, and dispute handling.
What happens if I back out after deadlines expire?
- You may be in default. The seller may be able to keep your earnest money under a liquidated damages clause, or pursue other remedies, depending on the contract and facts.
What if the escrow holder will not release funds after a canceled deal?
- Most escrow holders require a written mutual release. Without agreement, they may deposit the funds with the court through interpleader, or follow any dispute resolution steps in your contract.
