You found a home you love in Minneapolis, but now the offer mentions “earnest money.” How much should you put down? When can you get it back? And how do you keep it safe? You are not alone in asking these questions.
In Minnesota, a smart earnest money plan can help you win the house without putting your cash at unnecessary risk. In this guide, you will learn what earnest money is, common amounts in Minneapolis, when it is refundable, and how to protect it from wire fraud. Let’s dive in.
What earnest money is
Earnest money is a deposit you pay to show good faith when you sign a purchase agreement. If the sale closes, the money is credited toward your cash to close. This deposit tells the seller you are serious and gives the contract a remedy if a buyer defaults, depending on the terms. Your purchase agreement will name the amount and where the funds are held.
Who holds the deposit in Minneapolis
In Minneapolis and across Hennepin County, the deposit is usually held by the title or closing company named in your contract. Sometimes the listing broker’s trust account holds it. Either way, licensed escrow holders keep client funds in separate trust accounts and disburse only as directed by the contract or a legal order.
If a dispute comes up, the escrow holder may require a written release signed by both parties. If no agreement is reached, they can send the funds to the courts to decide.
How much earnest money to offer
Typical ranges vary by price point and competition:
- Common guideline: 1% to 3% of the purchase price.
- In competitive situations, buyers sometimes go higher, around 2% to 5%.
- For a Minneapolis single-family home priced around $300,000 to $400,000, you often see $3,000 to $8,000.
- Flat amounts, like $1,000 to $5,000, can work on lower-priced homes or simple deals.
Remember, this is not an extra fee. If you close, your deposit is applied to your down payment and closing costs.
When your money is refundable
Your purchase agreement controls the rules, but these contingencies usually protect your deposit if you cancel within the agreed timelines:
- Inspection contingency. If you end the deal during the inspection period, your deposit is typically refundable.
- Financing contingency. If you cannot secure the loan by the deadline and follow the notice rules, your deposit is usually refunded.
- Appraisal contingency. If the home appraises below the contract price and you terminate per the contract, you should get your deposit back.
- Clear title or seller breach. If the seller cannot deliver marketable title or breaches the contract, the deposit is generally refundable.
When your deposit is at risk
There are moments when you could forfeit earnest money:
- Buyer default after removing contingencies. If you waive protections and do not close, the seller may claim the deposit as damages if the contract allows.
- Missing deadlines. Failing to deliver funds on time or missing contingency dates can be a breach.
- Change of mind. If you walk away after contingencies expire, your deposit may be at risk.
The exact outcome depends on the wording in your Minnesota Association of REALTORS purchase agreement and any addenda.
How and when to deliver the deposit
Most Minneapolis offers set a short delivery window after mutual acceptance. You will often see 24 to 72 hours, but the timing is negotiable.
Common methods:
- Wire transfer to the title company or escrow holder.
- Certified or cashier’s check payable to the named escrow holder.
Ask for a written receipt that shows the amount, date, and the account where funds are held.
Protect your funds from wire fraud
Wire fraud targets real estate closings, including earnest money. Use these steps:
- Always verify wiring instructions by phone using a number you find and trust, not one from an email link.
- Confirm with your agent and the title company before sending any wire.
- Do not rely on email alone. Hackers spoof addresses and signatures.
- Keep documentation of every transfer and receipt.
If anything looks off, stop and call your known contacts right away.
Make a competitive, low-risk offer
You can strengthen your offer without taking on unnecessary risk:
- Choose a meaningful deposit. In many Hennepin County deals, around 1% can show commitment. In multiple offers, 2% may be persuasive.
- Keep key contingencies but shorten timelines. A 5 to 10 day inspection window can balance protection with seller confidence.
- Use a strong pre-approval. A solid lender letter makes your financing contingency more credible.
- Consider appraisal strategy carefully. Only commit to covering a gap if you can afford it.
- Stagger deposits if needed. For example, a smaller amount at acceptance with an additional deposit within 72 hours gives you time to move funds.
- Make your timeline realistic. A shorter, clean closing can offset a modest deposit.
Clear communication between your agent and the listing agent can also help your offer stand out.
Real-world Minneapolis examples
- Example 1: $350,000 listing, calmer market. You offer $350,000 with a 1% deposit of $3,500, a 10 day inspection, and a 21 day financing contingency. Your deposit is protected during contingencies.
- Example 2: $500,000 listing, multiple offers. You offer $505,000 with a 2% deposit of $10,100 and a 5 day inspection period. The higher deposit and faster timelines boost competitiveness.
- Example 3: Need a few days to transfer cash. The contract calls for $1,000 at acceptance and an additional $4,000 within 72 hours. This signals seriousness while you move funds.
What happens in a dispute
If buyer and seller disagree about who gets the earnest money, the escrow holder will usually ask for a written release from both sides. If no agreement is reached, they may hold the funds until a court decides. Your agent can help you follow notice requirements and timelines in your contract.
Quick checklist before you send funds
- Confirm who holds the deposit and the delivery deadline in your contract.
- Verify wiring instructions by phone using known, trusted numbers.
- Use certified funds for checks and keep copies of receipts.
- Track contingency dates for inspection, financing, and appraisal.
- Get written confirmation when escrow receives your deposit.
Final thoughts
A well-structured earnest money plan can make your offer stronger without putting your savings on the line. In Minneapolis and Hennepin County, the right amount, clear contingencies, and a safe delivery process go a long way.
If you want help tailoring your earnest money and offer strategy to a specific home, reach out to Jesse James Forsell for local guidance and a plan that fits your goals.
FAQs
What is earnest money in Minnesota?
- It is a good faith deposit listed in your purchase agreement, held in escrow, and credited toward your down payment and closing costs at closing.
Who holds earnest money in Minneapolis transactions?
- Usually the title or escrow company named in the purchase agreement, or sometimes the listing broker’s trust account.
How much earnest money should I put down?
- A common range is 1% to 3% of the price; in Minneapolis you often see $3,000 to $8,000 on $300,000 to $400,000 homes, with higher percentages in competitive situations.
When do I get my earnest money back if I cancel?
- If you terminate within protected periods, such as inspection, financing, or appraisal contingencies, your deposit is typically refundable per the contract.
How do I avoid wire fraud when sending my deposit?
- Verify wiring instructions by phone with known contacts, avoid email-only confirmations, and keep written receipts from the escrow holder.
