Putting in an offer on a home in Washington DC and unsure how earnest money works? You are not alone. In our fast-moving market, this deposit can help your offer stand out or put your funds at risk if you do not plan carefully. In this guide, you will learn what earnest money is, what is typical in DC, when it is due, what makes it refundable, and how to protect it from wire fraud. Let’s dive in.
What earnest money is
Earnest money is a good-faith deposit you submit with your offer to show the seller you are serious. If the sale closes, the deposit is credited to your purchase price or closing costs. If the deal falls through, the deposit is either returned to you or released to the seller based on the contract.
In the DC region, funds are commonly held by a title or settlement company. Brokerages can also hold deposits in escrow, but title companies are often preferred because they issue receipts, manage separate escrow accounts, and disburse funds at closing.
Typical DC deposit amounts
In a standard or neutral market, buyers often put down about 1% to 3% of the purchase price. In competitive neighborhoods with high demand, you may see deposits in the 2% to 5% range or higher. Cash buyers sometimes offer larger deposits, such as 5% to 10%, to signal strength.
The amount you choose depends on your risk tolerance, price point, and how competitive the listing is. Larger deposits can strengthen your offer, but they increase your exposure if you default after contingencies expire.
When the deposit is due and how to pay
In many DC-area contracts, the earnest money is due to escrow within 24 to 72 hours after ratification. Your contract will specify who holds the funds, the deadline, and the acceptable form of payment.
Common delivery methods include a wire transfer, a certified or cashier’s check, or sometimes a personal check. Ask the escrow holder for written instructions and request a written receipt when the money arrives. Late or missing deposits can be a breach, so mark the deadline the moment your offer is accepted.
Contingencies that protect your deposit
Contingencies define when you can cancel and get your deposit back. The most common ones are:
- Inspection contingency, often 3 to 10 days. You can inspect, negotiate, or cancel based on findings within the period.
- Financing contingency, often 21 to 30 days. If your lender cannot approve the loan on time, you can terminate under the terms.
- Appraisal contingency. If the appraisal comes in low and you do not waive it, you can renegotiate or cancel.
- Title or HOA document review. You can cancel if unacceptable title issues or association documents arise within the review period.
Retaining contingencies offers protection. Waiving them can make your offer more competitive, but it increases your risk of forfeiting the deposit if something goes wrong.
When you get it back vs when you might forfeit
Your earnest money is typically refundable if you terminate within a valid contingency period or the seller breaches the contract. It is often forfeited if you default after contingencies expire or fail to close without a contractual right to do so.
If there is a disagreement, the escrow holder will usually keep the deposit in the account until both parties sign a release or a court or arbitration order instructs a disbursement. In some cases, the escrow holder can file an interpleader to let a court decide.
Step-by-step: coordinating with a DC title company
Follow these steps to keep the process smooth and documented:
As soon as your contract is ratified
- Send the executed contract and your pre-approval or proof of funds to the chosen title company.
- Confirm the deposit amount, deadline, and delivery method in writing.
- Request wire instructions if wiring and verify by phone using a known number.
- Deliver the deposit and secure a written escrow receipt.
Before closing
- Ask for an estimated closing statement to see how the deposit will be credited.
- Confirm that the deposit shows in the escrow balance.
- Re-verify final wiring instructions for closing funds by phone and confirm receipt.
Documentation checklist
Keep these items on hand so you can act quickly and avoid delays:
- Ratified purchase agreement.
- Lender pre-approval letter or proof of funds for cash.
- Evidence of earnest money delivery and a written escrow receipt.
- Gift letter and donor bank statements if using gift funds, per lender rules.
- Contact details for your settlement officer, lender, and agents.
Wire fraud safety checklist
Wire fraud targets real estate transactions nationwide. Protect yourself with these steps:
- Call the title company using a published phone number to verify wiring instructions before sending any funds.
- Use multi-factor verification for any requested changes to account details.
- Never rely only on emailed instructions. Be suspicious of last-minute changes.
- Confirm that the wire was received with your settlement officer.
Strategy in competitive DC offers
If the listing is drawing multiple offers, consider a deposit that aligns with local norms for similar homes. You can pair a stronger deposit with targeted contingencies that still protect you, such as a focused inspection timeline or appraisal strategies that fit your financing.
Calendar every deadline the moment your offer is accepted, and work closely with your lender and title team. A thoughtful plan helps you present a strong offer while keeping your deposit safe.
When to involve an attorney
Consider legal counsel if the deposit is large and there is a dispute, if you believe you terminated properly under a contingency but the seller disagrees, or if there are complex title issues or concerns about misrepresentation. Quick legal guidance can save time and reduce risk.
A well-structured deposit, clear contingencies, and strong coordination with your title company can make your DC home purchase smoother and safer. If you want a tailored earnest money strategy for your goals and timelines, connect with Jared Russell for high-touch guidance from offer to closing.
FAQs
What is earnest money in Washington DC and how does it work?
- It is a good-faith deposit submitted with your offer, credited to you at closing if the deal completes, and held in escrow by a title company or brokerage.
How much earnest money is typical for DC homes?
- Many buyers put down about 1% to 3% in normal conditions, and 2% to 5% or more in competitive situations, with cash buyers sometimes offering 5% to 10%.
How fast do I need to deliver earnest money after acceptance in DC?
- It is commonly due within 24 to 72 hours after ratification, per your contract, so confirm the deadline and arrange delivery immediately.
When is earnest money refundable in DC-area contracts?
- It is usually refundable if you validly terminate within an active contingency period or if the seller breaches the contract.
Who typically holds earnest money in the DC region?
- A title or settlement company often holds the funds in escrow, though brokerages can also serve as escrow holders under local rules.
How can I avoid wire fraud when sending earnest money?
- Always verify wiring instructions by calling the title company at a known number, use multi-factor checks, avoid relying only on email, and confirm receipt after sending.
