Buying in Ann Arbor and wondering what earnest money actually does for you? You are not alone. In a fast-moving market, this small but important deposit can help your offer stand out and protect your interests when handled the right way. In this guide, you will learn what earnest money is, typical amounts in Washtenaw County, who holds it, when it is refundable, and how to keep it safe through closing. Let’s dive in.
Earnest money basics
What it is
Earnest money is a good-faith deposit you deliver after the seller accepts your offer. It shows commitment and gives the seller some security that you intend to complete the purchase. If all goes well, the deposit is credited to your down payment or closing costs at settlement.
Why it matters
- It signals seriousness in competitive situations.
- It creates a financial consequence if a buyer defaults under the contract.
- Funds are held in escrow until you close or the contract is terminated based on its terms.
Ann Arbor norms and timing
How much is typical
In Ann Arbor and across Washtenaw County, earnest money is often a fixed amount for lower-priced homes, commonly in the range of 1,000 to 5,000 dollars. For higher-priced properties, you often see deposits around 1 to 3 percent of the purchase price. In highly competitive situations, some buyers raise deposits to 3 to 5 percent or more to strengthen an offer.
Exactly how much you should offer depends on price point, neighborhood demand, and your overall offer strength. You can tailor the amount to the property and the market segment you are targeting.
When you pay it
The purchase agreement sets the deadline, but the norm is to deliver your deposit quickly after acceptance, often within 24 to 72 hours. Make sure the contract clearly states the amount, the deadline, and where the funds will be held.
Who holds the funds
In Washtenaw County, the escrow holder is typically one of the following:
- A local title company or closing agent
- A real estate brokerage trust account
- A closing attorney or other agreed escrow agent
You usually deliver funds by check or wire to the named escrow holder. Keep your escrow receipt. At closing, your earnest money is applied to your cash to close.
Refund rules and contingencies in Michigan
When it is refundable
Whether you can recover your earnest money depends on the contract. Most standard agreements include buyer protections called contingencies. If you terminate properly within a contingency window, you generally receive a refund. Common contingencies include:
- Home inspection contingency. If issues arise and your contract allows cancellation, you can terminate within the inspection period and recover your deposit.
- Financing contingency. If you cannot obtain financing by the stated deadline and terminate per the contract, your deposit is usually refundable.
- Appraisal contingency. If the property appraises below the purchase price and the parties do not reach a new agreement, you may cancel per the contract and recover funds.
- Title contingency. If a title issue is not cured within the contract framework and you terminate correctly, your deposit is typically returned.
- Other written contingencies. For example, the sale of your current home if it is part of the agreement.
To preserve a refund, you must act before deadlines and follow notice rules exactly. Put things in writing and keep documentation such as inspection reports and lender communications.
When the seller may keep it
If a buyer defaults, misses deadlines, or wrongfully terminates, the seller may have a claim to the earnest money as liquidated damages, depending on the contract language. Always track your contingency timelines and notice steps to avoid unintentional default.
Handling disputes and releases
Most Michigan purchase agreements include instructions for how escrowed funds are handled and how disputes are resolved. If the buyer and seller disagree about who should receive the funds, the escrow holder will usually require a mutual release signed by both parties or a final order from a court or arbitrator. Keep detailed records of all notices, dates, and communications in case questions arise.
How to protect your deposit
Use this simple checklist to keep your earnest money safe:
- Before you write an offer:
- Choose a deposit strategy that fits your price point and the level of competition.
- Confirm who will hold the deposit and how you will deliver it.
- After acceptance:
- Deliver funds by the contract deadline and request written confirmation of receipt.
- Save copies of your check, wire confirmation, and escrow receipt.
- During contingencies:
- Calendar all deadlines for inspection, financing, appraisal, and title.
- Complete inspections quickly and communicate any concerns in writing.
- If you cannot meet a deadline, talk with your agent about extensions before time runs out.
- If issues arise:
- Follow contract notice procedures precisely.
- Keep lender communications and inspection reports.
- Seek guidance from your agent and, if needed, a real estate attorney before signing any release.
Competitive strategy in Washtenaw County
The Ann Arbor area includes a range of neighborhoods and price bands. University-adjacent homes, downtown condos, and recently renovated properties often draw more competition. In multiple-offer situations, buyers may:
- Increase the earnest money amount to signal strength.
- Shorten contingency windows to look more decisive.
- Tighten financing timelines with a well-prepared lender file.
Each move has tradeoffs. A larger deposit can help your offer stand out, but it raises risk if you miss a deadline. Shorter contingency periods can be persuasive, but you need scheduling confidence for inspections, appraisal, and underwriting. Balance competitiveness with protection based on the property, your financing, and your comfort level.
Typical timeline from offer to closing
Here is a common sequence you may see in Ann Arbor. Your exact dates will follow your contract.
- Offer accepted and deposit due within 24 to 72 hours.
- Inspection window, often 7 to 14 days. You may negotiate repairs, request concessions, or cancel per the contract.
- Appraisal and title review period. You raise title objections if needed.
- Financing commitment date, often around 21 to 30 days, depending on lender and file.
- Final walkthrough and closing. Your earnest money is credited to your cash to close.
- If you terminate within a contingency and follow notice rules, the escrow holder processes the refund per contract instructions.
Working with a local guide
A well-crafted earnest money strategy can be the small edge that wins you the right home while keeping your risk in check. You benefit from an agent who knows how different Ann Arbor neighborhoods are behaving, what sellers expect in your price band, and how to structure deadlines that fit your lender and timeline.
At Charles by Reinhart, you receive boutique, high-touch guidance backed by the reach and resources of a respected local brokerage. You get clear timing, neighborhood context, and a step-by-step plan from offer to closing. If you are planning a purchase in Ann Arbor or anywhere in Washtenaw County, we can help you choose the right deposit amount, map your contingency windows, and move with confidence.
Ready to start your search or refine your offer strategy? Schedule a Consultation with Charles by Reinhart to talk through your goals and next steps.
FAQs
What is earnest money in a Michigan home purchase?
- It is a good-faith deposit you pay after the seller accepts your offer, held in escrow and credited to your down payment or closing costs at closing.
How much earnest money is typical in Ann Arbor?
- You often see 1,000 to 5,000 dollars on lower-priced homes and around 1 to 3 percent of the price on higher-priced homes, with larger deposits in competitive situations.
When do I need to pay earnest money in Washtenaw County?
- Most purchase agreements require delivery within 24 to 72 hours after acceptance, though your contract controls the exact deadline.
Who holds earnest money for Ann Arbor transactions?
- A local title company is common, but some deposits are held by a brokerage trust account or a closing attorney, as specified in your contract.
When is earnest money refundable in Michigan?
- If you terminate within a valid contingency window, such as inspection, financing, appraisal, or title, and follow notice rules, your deposit is generally refunded.
What happens if the buyer and seller disagree about the deposit?
- The escrow holder typically requires a mutual release or a final order before disbursing funds. Keep written records of all notices and deadlines.
