Buying your first home in Stillwater can feel like a string of new terms and fast decisions. One of the first is earnest money. You want to make a strong offer without risking more than you need to. The good news is that earnest money is straightforward once you know the purpose, timing, and refund rules. In this guide, you will learn what earnest money is in Minnesota, what is typical in Washington County, and how to protect your deposit from contract mistakes and wire fraud. Let’s dive in.
What is earnest money
Earnest money is a good-faith deposit you give after the seller accepts your offer. It shows you are serious about buying and gives the seller confidence while both sides work through contingencies like inspection, financing, appraisal, and title. If the sale closes, your deposit is credited toward your cash to close. If the deal falls apart, the contract decides who gets the funds.
Beyond signaling commitment, earnest money creates an agreed remedy if a buyer defaults. Many Minnesota purchase agreements set out whether the seller can keep the deposit as liquidated damages or pursue other remedies. The exact outcome always follows the contract.
Typical amounts in Stillwater and Washington County
There is no single right number. Amounts vary by price point and market conditions.
- Common guidance is roughly 1 percent of the purchase price, but many buyers use flat amounts.
- In many Minnesota communities, buyers often see deposits in the $1,000 to $5,000 range for single-family homes.
- In more competitive situations or on higher-priced homes, deposits can be several thousand to $10,000 or more.
- For lower-priced properties, some buyers use smaller sums like $500 to $1,000.
Stillwater sits inside the larger Twin Cities market. Local expectations shift with inventory and competition. In a seller’s market with low supply, larger deposits are more common. In a buyer’s market, smaller amounts may be acceptable. Ask your Washington County agent for current norms in your target neighborhood and price tier before you write an offer.
How the money is handled in Minnesota
Minnesota agents often use standard purchase agreement forms that include the earnest money amount, the delivery deadline, the named escrow agent, and how refunds or remedies work. Your offer should clearly state all of these details.
Where funds are held
Earnest money is typically held by the named escrow agent. This is often a title or escrow company, a real estate broker’s trust account, or a closing attorney or title agent. Funds stay in escrow until closing or until a contract event calls for a release.
How to pay safely
Accepted forms include personal check, certified or cashier’s check, wire transfer to the escrow or title company, or an electronic deposit if the escrow agent allows it. Wire fraud is a real risk. Always verify wiring instructions by calling the title or escrow company using a phone number you look up independently. Do not rely on email links. If you prefer, use an in-person delivery or a cashier’s check when that is safer and accepted by the escrow holder.
Deposit timing
Your contract will set a deadline for delivery, commonly within 24 to 72 hours after mutual acceptance. Meet the exact deadline in the agreement. If funds are late, the seller may have remedies that can include canceling the contract or other options listed in the agreement.
What happens to the funds
At closing, the earnest money is credited toward your cash due. If the sale does not close, the contract will control when and how the escrow agent releases funds, whether to you, to the seller, or by mutual release.
Contingencies and refunds
Your purchase agreement lays out the protections that can allow a refund and the steps you must follow.
Common buyer protections
- Inspection contingency: You may cancel or negotiate within the inspection period. If you cancel within the timeline and follow the terms, the deposit is typically refunded.
- Financing contingency: If your loan is denied under the contract terms and you cancel on time and as written, the deposit is usually refundable.
- Appraisal contingency or lender condition: If the home does not appraise at or above the price and the contract allows, you can renegotiate or cancel.
- Title contingency: You can cancel if a title defect is not resolved under the contract.
Refund timing and rules
Refunds depend on hitting the contract’s deadlines and following the exact steps. If you validly terminate within a contingency window, the earnest money is typically returned. If you miss a deadline or cancel outside a listed contingency, you can risk forfeiting the deposit and the seller may have other remedies.
Seller remedies and disputes
If a buyer defaults, remedies depend on the contract and state law. Many agreements give the seller the option to keep the earnest money as liquidated damages, or to seek actual damages or specific performance. When there is a dispute, the escrow holder may keep the funds in the trust account until both parties agree or a court or other process orders a release. Some Minnesota forms include mediation provisions. If a dispute arises, act quickly with your agent and follow the contract.
Smart strategies for first-time buyers
You can strengthen your Stillwater offer without taking on unnecessary risk. Here is a simple plan.
- Align your deposit with local norms. Ask your agent for recent examples in your price range and neighborhood.
- Keep contingency timelines realistic. Shorter timeframes can look strong but increase risk. Know your inspection and financing dates before you write the offer.
- Choose the right amount. A larger deposit can help in a multiple-offer situation, but decide how much you are comfortable risking if a dispute occurs.
- Document everything. Name the escrow agent in the offer, deliver funds as allowed, and get a written receipt.
- Guard against wire fraud. Verify wiring instructions by phone using a number you find on your own.
- Budget early. Treat the deposit as part of your overall cash to close, even though you will get credit for it at closing.
A quick Stillwater checklist
- Verify the named escrow agent and where to deliver funds.
- Track the deposit deadline and calendar all contingency dates.
- Keep proof of deposit and a copy of the signed purchase agreement.
- Confirm your payment method with the escrow holder before sending funds.
- Call to verify any wiring instructions before you transfer money.
Examples of how buyers right-size deposits
- Starter townhome in a calm week: You might offer a flat amount near the lower end of the local range to stay competitive without overcommitting.
- Mid-market single-family with multiple offers: You might move closer to 1 percent or increase the flat amount to stand out.
- Higher-priced or very competitive listing: You might use a larger deposit that fits your risk tolerance and your budget.
These are examples only. The right amount depends on your price band, how many buyers are competing, and your comfort level with risk. Your agent can show you recent Stillwater or Washington County offers for context.
Common mistakes to avoid
- Missing the deposit deadline. Deliver funds early and confirm receipt.
- Skipping verification on a wire. Always call the title company using a known number.
- Shortening contingencies too much. A rushed inspection or financing timeline can backfire.
- Assuming refunds are automatic. Refunds follow the contract. You must cancel on time and in writing under a valid contingency.
- Sending money to an individual. Only deliver funds to the named escrow holder.
Work with a local guide you trust
Stillwater and Washington County buyers win when they pair smart contract terms with clean execution. That includes right-sizing earnest money, meeting deadlines, and protecting funds from wire fraud. If you want a steady, no-pressure guide who will walk you through each step, reach out to Chuck Eckberg. With decades of local experience and a client-first approach, you will get clear advice tailored to your price point and neighborhood.
FAQs
What is earnest money in a Minnesota home purchase?
- It is a good-faith deposit you make after an accepted offer to show commitment. It is held in escrow and credited to your cash to close if the sale proceeds.
How much earnest money is typical in Stillwater, MN?
- Many buyers use $1,000 to $5,000 or about 1 percent as a starting point, then adjust for price and competition. Higher-priced or competitive homes can call for more.
When is earnest money due in Minnesota contracts?
- The purchase agreement sets the deadline, often within 24 to 72 hours of mutual acceptance. Deliver on time and get a receipt.
Who holds earnest money in Washington County transactions?
- A named escrow holder such as a title or escrow company or a broker trust account holds the funds until closing or a release under the contract.
Is earnest money refundable after a failed inspection?
- If you cancel within the inspection period and follow the contract steps, the deposit is typically refundable. Missing deadlines can put it at risk.
How is earnest money applied at closing in Minnesota?
- It is credited toward your required cash to close, such as your down payment and closing costs.
What happens if there is a dispute over earnest money?
- The escrow agent usually holds funds until both parties agree or a court or agreed process orders disbursement. Check your contract for any mediation steps.
