Confirm the amount, recipient, deadline, permitted payment method, and conditions for release. Do not rely on a general article as the terms of your particular transaction.
Where the money goes
A purchase escrow account holds funds while the transaction moves toward closing. Fannie Mae describes a licensed real estate agent or title company as a typical holder of the good-faith deposit. This purchase escrow is different from the mortgage escrow account used later to pay property taxes and insurance. [2]
Agree on terms
Identify the deposit and deadlines in the purchase agreement.
Confirm the holder
Verify who receives the funds and the payment instructions.
Keep the record
Keep evidence of payment and ask for confirmation of receipt.
Check the outcome
Review the closing credit or the applicable release process.
A practical checklist, not a fixed timeline or a substitute for the contract. Purchase escrow background: Fannie Mae. [2]
How much should you offer?
Earnest money can be a fixed dollar amount or a percentage of the purchase price. There is no single deposit amount recommended on this page for every Indiana or Kentucky transaction. Discuss the actual offer with Tina and make sure the agreed amount is available before committing to a deadline. [1]
These figures show the arithmetic, not a required or typical market deposit.
| Illustrative percentage | Calculation | Deposit |
|---|---|---|
| 0.5% | $300,000 × 0.005 | $1,500 |
| 1% | $300,000 × 0.01 | $3,000 |
| 2% | $300,000 × 0.02 | $6,000 |
A refund is not automatic
Purchase contingencies can affect whether a buyer receives the deposit back when a transaction does not close. A buyer who cancels without a contractual basis may put the deposit at risk. The National Association of Realtors emphasizes that practices depend on state and local law and the transaction. [1]
Before signing, ask: Which contingencies are included? What action is required, by what deadline, and how must notice be delivered? Who handles a release? Where does the agreement address a disagreement over the funds? Do not assume a grace period or a guaranteed number of days for repayment. A disputed deposit calls for review of the actual agreement and applicable law with a qualified attorney.
Check the credit at closing
If the purchase closes, the good-faith deposit is generally applied toward the down payment or closing costs. [2] Check the deposit and final cash-to-close figures on your Closing Disclosure with the closing agent. The CFPB's explainer identifies the deposit as money already paid toward the sale price and explains how it affects the amount needed at closing. [3]
Keep your payment records and follow your lender's document instructions. Lenders may need documentation of the source of purchase funds; ask which records are required rather than assuming a receipt alone is sufficient. [4]
Verify before wiring money
A familiar-looking email is not verification.
Before sending funds, confirm the account instructions in person or by calling a trusted representative at a number established independently. Do not use a new telephone number supplied in the same email as the wire instructions. Be particularly cautious about unexpected last-minute changes. These precautions follow CFPB guidance on mortgage-closing scams. [5]
Bring these questions to your offer discussion
- What am I agreeing to pay, and when?
- Find the amount and deadline in the actual agreement.
- Who will hold the money?
- Confirm the named escrow holder, payment method, and receipt process.
- What could put the deposit at risk?
- Review contingencies, notice requirements, and the consequences of cancellation with your agent and, where needed, your attorney.
- How does it fit into my total purchase budget?
- Discuss the deposit alongside the down payment, closing costs, and any lender documentation requirements.
For the broader process, see the first-time buyer guide, learn about buyer representation, or talk with Tina about your purchase.
Sources and scope
General consumer information for buyers considering a home in Southern Indiana or Louisville. This is not a review of a particular contract or legal advice.
- National Association of Realtors: Consumer Guide—Escrow and Earnest Money
- Fannie Mae: What Is Escrow?
- Consumer Financial Protection Bureau: Closing Disclosure Explainer
- Consumer Financial Protection Bureau: Submit Documents and Answer Requests from the Lender
- Consumer Financial Protection Bureau: Mortgage Closing Scams