You found a home in Westerville and you are ready to write an offer. Then your agent mentions “earnest money,” and the questions start. How much should you put down? Who holds it? When do you get it back? You do not want surprises with money on the line.
In Westerville and across Franklin County, earnest money is a normal part of a purchase offer. When you understand how it works, you can use it to strengthen your position and protect your budget. This guide explains typical amounts, timelines, protections, and what happens if things do not go as planned. Let’s dive in.
Earnest money basics in Westerville
Earnest money is a deposit you include with your offer to show the seller you are serious. If the sale closes, that deposit is credited toward your closing costs or down payment. If the sale does not close, what happens next depends on the contingencies and deadlines in your contract.
It is not the same as your down payment. It is a separate deposit that is usually due soon after the seller accepts your offer. In Ohio, buyers rely on contingencies in the purchase agreement rather than separate option fees.
Typical amounts and who holds it
In Westerville and similar Ohio suburbs, earnest money often ranges from a few hundred to several thousand dollars. In balanced situations, amounts around $1,000 to $3,000 are common. For higher-priced homes or competitive offers, many buyers offer 1% to 3% of the price. In multiple-offer situations, some buyers choose a larger deposit to stand out.
Your contract will name an escrow holder. In Franklin County, that is commonly a title company or settlement agent. Sometimes a real estate brokerage trust account or a closing attorney’s escrow account holds the funds, if agreed and permitted. The key is to use a licensed entity with a proper trust or escrow account.
How the process works
Your purchase agreement controls the deposit amount, where it is held, how and when you must deliver it, and the conditions for refund or forfeiture. Local forms used by agents include clear fields for earnest money and standard release language.
- Deposit timing: Many contracts require you to deliver the deposit within 24 to 72 hours of acceptance. Pay attention to the exact deadline in your agreement.
- At closing: If the deal closes, your earnest money is credited to the funds you need to bring.
- If the deal cancels: If you cancel for a valid contract reason within the deadline, you typically receive a refund. If there is a dispute, the escrow holder may need a signed mutual release or a court order before disbursing.
Buyer protections and common contingencies
Most Ohio purchase contracts use contingencies that protect you if certain events occur. If you follow the contract steps and timelines, your earnest money is usually refundable.
- Inspection contingency. You can inspect and either negotiate repairs or cancel within the inspection period.
- Financing contingency. If you cannot secure financing within the stated time and follow the notice rules, you can cancel.
- Appraisal contingency. If the appraisal comes in below the purchase price, you can seek a price change or cancel per the clause.
- Title review. If there are title problems that cannot be resolved, your contract will address next steps.
Westerville timeline at a glance
1) Offer and acceptance
You submit an offer that includes an earnest money amount, who holds it, and contingency timelines. Once the seller accepts, the clock starts.
2) Deposit your funds
You deliver the deposit to the named escrow holder within the contract deadline, often within 1 to 3 business days. Always get written confirmation of the deposit.
3) Complete contingencies
- Inspection period: often 7 to 14 days after acceptance.
- Financing approval: commonly 21 to 30 days, depending on loan type.
- Appraisal timing: typically occurs during your financing window.
4) Close or cancel per contract
- Closing date: often 30 to 45 days from acceptance, subject to negotiation.
- If you cancel under a valid contingency on time, the escrow holder typically releases your deposit once both parties sign a release or as the contract instructs.
- If you default after contingencies lapse, the seller may seek to keep the deposit as liquidated damages, depending on your contract.
For buyers: protect your earnest money
Use your deposit to strengthen your offer while staying protected.
- Decide on a smart amount. Align the deposit with your price point and the market. In competitive cases, a larger deposit can help, but be comfortable with the risk if you waive protections.
- Name the escrow agent. Specify a title company or attorney in the contract. Confirm the delivery method and deadline in writing.
- Put dates on the calendar. Use actual calendar dates for inspection, financing, and appraisal deadlines, not just “X days.”
- Keep records. Save inspection reports, lender letters, and any notices that support contingency use or cancellation.
- Clarify financing and appraisal language. Make sure the clauses match your loan plan and timelines so you keep refund rights if needed.
- Require written releases. If a deal ends, use written mutual releases before any disbursement.
For sellers: protect your sale and position
Your goal is to confirm the buyer’s commitment and keep the closing on track.
- Require prompt deposit. Specify a clear timeframe for delivery after acceptance and verify receipt from the escrow holder.
- Choose a reputable escrow holder. Use a well-established local title company or closing attorney.
- Use clear deadlines. Ensure contingency windows and notice requirements are precise. If you plan to rely on the deposit for compensation in a breach, include a clear liquidated damages clause.
- Document everything. Do not attempt to release funds on your own. Use standard forms and instructions.
- Mitigate if a buyer defaults. Continue marketing the property. Courts may consider mitigation if damages beyond the deposit are pursued.
What if these situations happen?
Inspection reveals major issues
If you cancel within the inspection period according to the contract, you typically receive a full refund of your earnest money.
Appraisal comes in low
You can request a price adjustment or cancel under the appraisal contingency, if included. If you cancel per the clause and timeline, the deposit is usually refunded.
Financing falls through
If you follow your financing contingency and provide required notice on time, you can cancel and receive a refund. If you miss the deadline or do not have the contingency, the seller may seek the deposit as liquidated damages per the contract.
You walk away after contingencies expire
If you cancel without a contractual reason after deadlines, the seller may claim a breach and seek to retain the deposit as stated in the agreement.
The seller backs out without cause
You can seek a return of your deposit and may have other remedies under Ohio law, including potential specific performance. Outcomes depend on the contract and facts.
The escrow holder will not release the funds
If the parties disagree, the escrow holder may hold the funds until a mutual release is signed or a court order instructs disbursement. Mediation or arbitration can also apply if required by the contract.
Working with escrow and title in Franklin County
In Westerville, title companies and some closing attorneys frequently act as escrow agents. Confirm these details early:
- The exact escrow holder named in your contract.
- How funds are delivered, who confirms receipt, and the deposit deadline.
- The contact person for deposit confirmation and how you will receive the credit or refund at closing.
- Any local title or recording practices that could impact your timeline.
Always ask for written confirmation when your earnest money is deposited, and keep all documents in a single folder for quick reference.
Taxes and when to consult professionals
If your earnest money is applied at closing, it simply becomes part of the purchase price. If a seller keeps a forfeited deposit as liquidated damages, that amount is generally reported as income. Because tax treatment depends on individual facts, it is smart to check with a tax professional.
Consider speaking with a real estate attorney if a large deposit is at stake, if contract language is unclear, or if a dispute arises and the parties do not agree to a mutual release. Local attorneys and title professionals understand Franklin County norms and can guide next steps.
Final thoughts
Earnest money is a small part of the offer with a big impact on how your deal looks and how protected you are. With clear deadlines, the right contingencies, and a reputable escrow holder, you can reduce risk and move to closing with confidence.
If you want help choosing the right deposit strategy, aligning contingency dates, and navigating Westerville norms, reach out to Jason Peeler. You will get clear, numbers-first guidance backed by local experience so you can make a confident move.
FAQs
What is earnest money and how is it different from a down payment?
- Earnest money is a good-faith deposit credited to you at closing, while a down payment is the larger amount you bring to fund the purchase; earnest money is separate but applied at closing.
How much earnest money is typical in Westerville, Ohio?
- Amounts often range from $1,000 to $3,000 in balanced situations and around 1% to 3% of the price for higher-price or competitive offers, depending on negotiation.
Who holds earnest money in Franklin County transactions?
- A licensed escrow holder such as a title company or settlement agent commonly holds it; sometimes a brokerage trust account or closing attorney holds funds if agreed.
When is earnest money refundable to the buyer in Ohio?
- If you validly cancel within contract contingencies like inspection, financing, appraisal, or title, your deposit is generally refundable per the agreement.
What happens if the buyer’s appraisal is lower than the purchase price?
- With an appraisal contingency, you can renegotiate or cancel within the deadline; if you cancel under the clause, the earnest money is typically refunded.
How fast do I need to deposit earnest money after offer acceptance in Westerville?
- Many contracts require delivery within 24 to 72 hours after acceptance, but your agreement controls the exact deadline.
Can a seller keep the earnest money if the buyer defaults after contingencies expire?
- The seller may seek to retain the deposit as liquidated damages if the contract allows, or pursue other remedies; outcomes depend on contract terms and facts.
What if the escrow company will not release disputed earnest money?
- The escrow holder typically needs a mutual release signed by both parties or a court order, and may hold funds until the dispute is resolved.
Are earnest money deposits safe in escrow accounts?
- Yes, funds should be held in licensed trust or escrow accounts under Ohio regulations, and you should receive written confirmation of deposit.
Will earnest money affect my taxes if a sale falls through?
- If a seller keeps a forfeited deposit as liquidated damages, it is generally taxable income; consult a tax professional for your specific situation.
