Buying a home in Denver and hearing a lot about earnest money? You’re not alone. This one piece of the contract can feel mysterious, yet it plays a big role in how strong your offer looks and how protected your deposit is. In this guide, you’ll learn what earnest money is in Colorado, typical amounts in Denver, key deadlines, and when your deposit is refundable. Let’s dive in.
Earnest money basics
Earnest money is a good-faith deposit you make after your offer is accepted. It shows the seller you’re serious and gives them security while the deal moves toward closing. If you close, that money is credited toward your purchase price and closing costs. If you do not close, the contract controls whether the funds are refunded or released to the seller.
In Colorado, the Contract to Buy and Sell Real Estate includes the earnest money terms. The contract sets the amount, where the money is held, delivery deadlines, and what happens if either party defaults. There isn’t a single state rule that makes earnest money refundable. The contract does that.
Typical Denver amounts
In Denver, earnest money is usually a flat amount or a percentage of the purchase price. You’ll commonly see:
- Lower-competition or modest offers: $1,000 to $5,000.
- More typical offers on median-priced homes: $3,000 to $10,000.
- Competitive situations or higher-priced homes: 1% to 3% of the purchase price.
These ranges shift with the market. In a sellers’ market, buyers often raise earnest money to stand out. In a balanced or slower market, lower amounts are more common.
What affects your amount
- Market conditions. Hotter markets push amounts higher as buyers compete.
- Price point and buyer profile. Larger purchases often carry larger deposits.
- Contingencies. If you keep strong protections, you may choose a lower deposit. If you waive protections, a higher amount can signal commitment.
- Seller preferences. Some sellers want more certainty through a larger deposit.
How it fits your cash-to-close
Your earnest money is not an extra fee. It becomes part of your funds at closing and is applied toward your down payment and closing costs.
Where the money goes
Colorado contracts usually direct your earnest money to an escrow holder such as a title company, attorney, or broker. The escrow holder places the funds in a trust account and releases them only as the contract or written joint instructions allow.
Always request a written receipt after you deposit your funds. The receipt should show the amount, who paid, the date received, and where the funds are held. Keep any bank confirmations or cashier’s check receipts with your records.
Wiring and safety
Wire transfers and cashier’s checks are common for delivering earnest money. If wiring, always verify instructions directly with the escrow company by phone using a trusted number. This helps protect you from wire fraud.
Key Colorado deadlines
Your contract will include several timelines that affect your deposit:
- Earnest money delivery deadline. You must deliver your deposit by the stated date. Missing this can be a default.
- Inspection, loan, appraisal, and title/HOA deadlines. These set the windows for you to object, negotiate, or terminate. Acting within these timelines often preserves your right to a refund.
Mark these dates on your calendar and set reminders. If you miss a deadline, your options narrow and your deposit can be at risk.
When earnest money is refundable
Earnest money is typically refundable if you terminate within the contract’s allowed windows and follow the required steps. Common protections include:
- Inspection contingency. If you object based on inspection and terminate within the deadline, you usually receive a refund.
- Financing contingency. If you cannot secure your loan within the agreed period and properly terminate, you typically receive a refund.
- Appraisal contingency. If the appraisal is low and your contract allows you to end the deal, you can usually recover your deposit.
- Title/HOA/other contract contingencies. If contract documents reveal issues that allow termination and you act on time, your deposit is normally refundable.
The key is timing and procedure. Provide notices in writing and follow your contract’s steps.
When it may not be refundable
You may lose your deposit if you default after your contingency windows expire, or if you cancel for a reason not allowed by the contract. Common examples include:
- Missing a deadline and trying to terminate later.
- Waiving contingencies and then attempting to cancel for those issues.
- Failing to deliver earnest money on time if the contract treats that as a default.
Many Colorado contracts also give the seller the option to keep earnest money as liquidated damages if the buyer defaults. The specific outcome depends on the contract language and the facts of the situation.
If there’s a dispute
If you and the seller disagree about who should receive the deposit, the escrow holder will typically hold the funds until there are joint written instructions, a court order, or another contract-defined resolution. Some contracts include mediation or arbitration provisions. If a dispute arises, contact your agent, speak with the escrow holder about next steps, and consider consulting a real estate attorney.
Make a strong, safe offer
You can present a compelling offer while protecting your deposit:
- Increase earnest money only to a level you’re comfortable risking.
- Deliver your deposit quickly and get a written receipt.
- Shorten contingency periods only if you can meet the timelines.
- Keep clear, written agreements if you negotiate repairs or credits.
- Consider non-monetary terms like flexible closing or a rent-back when appropriate.
Each move has trade-offs. Bigger deposits and shorter deadlines can win deals but raise your exposure if you later cancel outside of allowed reasons.
Your step-by-step checklist
- Before you offer: Review market conditions and decide on an earnest-money strategy.
- In your offer: Specify the amount, where it will be held, and your delivery deadline.
- After acceptance: Deposit on time and get a receipt. Save all confirmations.
- During contingencies: Track every deadline. Send written notices as required.
- If concerns arise: Loop in your agent and escrow holder right away.
Denver buyer takeaways
A clear plan for earnest money helps you write a strong offer and sleep better through escrow. Set your amount with the market in mind, follow your contract deadlines, and keep your documentation tight. With the right strategy, your deposit can work to your advantage without adding unnecessary risk.
When you are ready to buy in Denver, you deserve guidance that is both strategic and calm. If you want help shaping a smart, protected offer, connect with Tina Christensen to Schedule a Personalized Consultation.
FAQs
Is earnest money refundable if the appraisal is low?
- Yes, if your contract includes an appraisal contingency and you follow the required steps to terminate or renegotiate within the deadline.
What if the seller cancels after accepting my offer?
- If the seller defaults without a contractual right, you may be entitled to return of your earnest money and potentially other remedies per the contract.
Can I wire my earnest money safely?
- Yes. Wiring is common, but always verify instructions directly with the escrow company by phone to avoid fraud.
Is earnest money separate from my down payment?
- No. At closing, your earnest money is applied toward your down payment and closing costs.
What documentation should I receive for my deposit?
- A written receipt from the escrow holder showing amount, payer, date, and where the funds are held, plus any wire or cashier’s check confirmations.
