Worried about losing your deposit when you make an offer in Denver? You are not alone. Earnest money can feel confusing, especially when timelines and contingencies decide if you get it back. In this guide, you will learn what earnest money is, how much buyers typically put down in Denver, and how Colorado contracts control refunds. Let’s dive in.
Earnest money in Colorado, defined
Earnest money is a good-faith deposit you provide after a seller accepts your offer. It shows commitment and is held by a neutral party, usually a title or escrow company named in the contract. It is not a separate fee. At closing, the deposit is credited to your down payment or closing costs.
Whether your deposit is refundable depends on the written contract. Colorado transactions rely on deadlines and contingencies. If you terminate within a valid contingency window and follow the notice rules, you usually receive your money back. If you breach the contract or miss a deadline, your deposit can be at risk.
How much earnest money in Denver
Amounts vary by price point, neighborhood competition, and property condition. In the Denver area, you often see a range from a few hundred dollars to several thousand dollars for lower-priced or less competitive listings. In many typical transactions, 0.5 to 2 percent of the purchase price is common. In multiple-offer situations or for higher-priced homes, 2 to 3 percent, or larger flat amounts, may be used to strengthen an offer.
- Lower-priced or less competitive: often $1,000 to $5,000
- Mid-range: often around 1 percent of the price
- Competitive or higher-end: 2 to 3 percent or more
Local norms shift with market conditions. In a seller’s market, sellers expect stronger deposits and tighter timelines. In a balanced market, smaller deposits and longer contingency periods are more common. Check current expectations with your Denver-area agent or title company before you write an offer.
Contract timelines that control refunds
Most Colorado residential deals use a standard contract that sets specific deadlines. These include when you must deliver the deposit, when inspections happen, when loan approval is due, and how appraisal issues are handled. Your rights to a refund are tied to meeting these dates and sending the correct written notices on time.
Earnest money delivery
Your contract will set a delivery window for the deposit, often 1 to 5 days after mutual acceptance. Make sure you send funds on time and get a written receipt from the title or escrow company. Late delivery can trigger seller remedies, including potential cancellation or claims against the deposit.
Inspection deadline
Inspection periods commonly run 5 to 10 days, but the exact period is what you sign. If you terminate in writing within this window, your deposit is generally refundable. If you negotiate repairs and cannot reach agreement, you must follow the contract’s notice steps and deadlines to keep your refund rights intact.
Financing and appraisal deadlines
Loan commitment dates often fall between 21 and 45 days, depending on the deal. If you cannot obtain financing and you properly terminate before the deadline, the deposit is typically refundable. Appraisal is often tied to financing. If value comes in low, you may be able to terminate or renegotiate within the contract’s appraisal or loan contingency timeline and preserve your refund.
Removing objections and closing
When you remove inspection or financing objections in writing, your remaining protections narrow. Backing out after removing contingencies can put your deposit at risk. At closing, the earnest money is applied to your funds due.
How contingencies affect refunds
Contingencies are your safety valves. If you exercise them on time and in writing, you usually get your deposit back. If you waive them or miss deadlines, refund protection can disappear.
- Inspection: Terminating within the inspection window generally returns your deposit.
- Financing: If your loan is not approved by the commitment date and you terminate per the contract, the deposit is typically refundable.
- Appraisal: A low appraisal can allow termination or renegotiation within the stated timeline, with refund protection.
- Title or survey: If the seller cannot cure title issues by the cure date, you can terminate and recover the deposit.
- Waived contingencies: Waiving protections to win a bid raises the risk of forfeiting earnest money if you later change course.
- Written notices: Use the exact written notice and delivery method the contract requires. Verbal agreements are not enough.
If a dispute happens
Title and escrow companies hold the deposit and act based on the contract and written instructions. If buyer and seller disagree on who gets the funds, the escrow holder may release funds by mutual agreement, hold them, or file an interpleader with the court to decide. Contracts may also call for mediation or allow litigation.
Sellers may keep the deposit as liquidated damages if the contract permits or seek additional damages in some cases. Buyers can recover the deposit when they terminate under a valid contingency or if the seller breaches. In select cases, parties may pursue additional remedies through the courts.
Steps to protect your deposit
- Confirm the escrow holder named in the contract and how to deliver funds.
- Calendar every deadline the day you go under contract: deposit delivery, inspection, appraisal, loan, objection removal, closing.
- Deliver earnest money on time and obtain a written receipt from the escrow or title company.
- Send all notices in writing exactly as the contract states, and keep copies.
- Ask your agent or attorney to review how and when to remove or preserve contingencies.
- Size your deposit strategically. Larger amounts can strengthen your offer but increase risk if you terminate outside protections.
- If a dispute arises, consider negotiation or mediation first. Engage a real estate attorney when significant sums are at stake.
Strategy in competitive Denver markets
In hot Denver neighborhoods and price tiers, bigger deposits and tighter timelines may help you win. Balance that with your comfort level and the strength of your financing. Protect key contingencies where needed, and be precise with timing and written notices. Local norms change, so lean on your agent and title company for current guidance before you submit an offer.
Ready to put a smart strategy to work? With two decades of Denver market experience and a consultative approach, Glenn Janda can help you structure a competitive offer while protecting your interests. Schedule a Free Consultation.
FAQs
Is earnest money refundable in Colorado?
- Refunds depend on the contract. If you terminate within inspection, financing, appraisal, or title contingencies and follow notice rules, you usually get it back; otherwise it may be forfeited.
Who holds earnest money in a Denver home purchase?
- A neutral title or escrow company named in the contract typically holds it. Always deliver on time and get a written receipt.
How much earnest money should I offer in Denver?
- Many deals land between 0.5 and 2 percent, with $1,000 to $5,000 on lower-priced homes and 2 to 3 percent in competitive cases. Ask your agent about current local norms.
What happens if the appraisal is low in Colorado?
- If the contract’s appraisal or loan contingency applies and you act by the deadline, you may terminate or renegotiate and preserve your deposit.
Can a seller keep my deposit and also sue me?
- Depending on the contract, a seller might retain the deposit as liquidated damages or seek additional damages through the courts in certain situations.
Does earnest money count toward my down payment?
- Yes. At closing, the deposit is credited to your funds due, including down payment and closing costs.
