Have you heard you need “earnest money” to buy a home in Traverse City and wondered how much, when it is due, and whether you can get it back? You are not alone. If you are relocating or buying for the first time, this part of the process can feel unclear. In this guide, you will learn exactly how earnest money works in Michigan, what local sellers expect in Grand Traverse County, and smart ways to strengthen your offer while protecting your deposit. Let’s dive in.
What earnest money means in Michigan
Earnest money is a good-faith deposit you agree to deliver once your purchase agreement is accepted. It shows the seller you are serious and it gives both parties a clear process to follow if something goes wrong. At closing, the deposit usually gets applied to your down payment or closing costs per the contract.
You can submit earnest money by check, certified funds, wire, or an approved electronic transfer. Many buyers choose a flat amount or a percentage of the price. In many markets, buyers often start around 1 to 3 percent, and competitive situations may push deposits higher. For a helpful overview of the basics, review this consumer explainer on what earnest money is and how it works.
How Traverse City handles deposits
In Michigan, deposits are held in a neutral escrow or trust account. Your contract should name the escrow holder and state how and when the funds will be delivered. Common holders include the buyer’s brokerage trust account, the title or closing company’s escrow account, or an attorney escrow account. State licensing rules and industry standards govern how these funds are handled. You can explore state oversight at the Michigan Department of Licensing and Regulatory Affairs.
Timing matters. Most local contracts require delivery within a set window after acceptance, often within 24 to 72 hours, though the exact deadline must match the agreement. Always get a dated receipt showing the amount, who paid, who holds the funds, and where they were deposited. For a clear primer on escrow basics, visit the American Land Title Association’s consumer resources.
Practical local note: Many Traverse City buyers use out-of-state banks. Plan ahead for wire timing and confirmation so your deposit arrives on time. Confirm the escrow holder early and keep the wiring instructions handy.
How much to offer in Traverse City
There is no fixed rule on amount. Many buyers use a flat dollar figure, such as $5,000, or a percentage like 1 to 3 percent, then adjust based on price point and competition. In multiple-offer situations or in higher-demand segments like select lakefront properties, sellers may favor stronger deposits. Your strategy should balance competitiveness with your comfort level and contingency protections.
Market conditions shift with seasonality and inventory. To gauge the current climate, review the Traverse City market overview and talk through norms for your price band and property type before you write. A right-sized deposit plus clear timelines can help your offer stand out without adding unnecessary risk.
When you can get it back
Whether your earnest money is refundable depends on the exact contract language and whether you act within the deadlines. Most purchase agreements include contingencies that protect your deposit if you follow the rules and provide written notice on time. The examples below reflect common practices seen in Michigan forms and national guidance from the National Association of REALTORS.
Inspection contingency
You typically get a set period, often 7 to 14 days, to complete inspections. If you terminate in writing within that period according to the contract, your earnest money is generally refundable. If you miss the deadline or cancel without a contractual reason, the seller may claim the deposit.
Financing contingency
If you apply in good faith and cannot obtain the financing described in the agreement, you can usually terminate in writing and receive a refund. Missing lender submission steps or deadlines can jeopardize your deposit.
Appraisal contingency
If the property appraises below the purchase price, your contract may allow you to renegotiate or terminate. If you terminate within the appraisal contingency timeline, the deposit is typically refunded.
Title contingency
If the seller cannot cure a title defect within the time stated in the contract and you terminate properly, you are generally entitled to a refund. If you choose to accept title despite the defect, the refund protection may not apply.
Sale-of-home contingency
If your offer includes a clause that your current home must sell by a specific date, a timely termination under that clause usually protects your deposit. In competitive situations, sellers often view this contingency as less attractive.
Seller default
If the seller breaches the agreement, you may be entitled to a refund of your deposit and potentially other remedies, depending on the contract. Keep all documentation of your performance and deadlines.
When you could lose it
If you default without a contractual right to terminate, the seller may be entitled to keep your deposit. Many agreements contain a liquidated damages clause that allows the seller to retain the earnest money as the exclusive remedy for buyer default. If there is no such clause, the seller may seek other remedies according to the contract and applicable law. For questions about standard forms and remedies, review resources from Michigan REALTORS.
Missing deadlines is the most common issue. Verbal notices are not enough. Send written notices as the contract requires, and keep proof of delivery. If a dispute arises, escrow holders often follow the instructions in the agreement, seek joint written direction, or hold funds until a court or mediator decides. You can read more about escrow dispute approaches in the ALTA consumer guide.
Tips for strong and safe offers
- Increase the initial deposit within your comfort level to signal commitment, but keep critical protections like inspection and financing in place.
- Shorten contingency periods only if you are prepared to move quickly on inspections, appraisal scheduling, and loan documents.
- Consider using an escalation clause or a higher price rather than waiving key protections. You can pair a competitive deposit with firm but fair timelines.
- Name an escrow holder that the seller finds acceptable to avoid delays in deposit delivery and receipt.
- Plan your wire or certified funds in advance, especially if you bank out of state. Confirm instructions through a verified phone call.
Seller considerations in Grand Traverse County
- Set clear expectations in the purchase agreement for the deposit amount, the named escrow holder, and the delivery timeline.
- Use a liquidated damages clause only if it aligns with your goals and the form language. Enforcement depends on the agreement and the facts.
- Require a dated escrow receipt and keep records of all communications, notices, and deadlines.
- If a dispute arises, look first to any contractual mediation or arbitration clauses before considering court.
Step-by-step timeline for Traverse City buyers
Before you make an offer
- Get mortgage preapproval and a current letter from your lender.
- Choose an earnest money amount after discussing exposure and timelines with your agent.
- Confirm who will hold the funds and how you will deliver them. Ask for wiring instructions early.
At offer and acceptance
- Write the exact deposit, escrow holder, and delivery deadline into the offer.
- Keep a complete copy of the executed agreement and any addenda.
- Calendar every contingency deadline on day one.
After acceptance
- Deliver funds on time and obtain a dated receipt with amount, payer, holder, and account details.
- Order inspections and submit any repair requests or termination notices within the agreed timeframes.
- Work closely with your lender to keep appraisal and financing on schedule. Keep proof of submissions.
If a dispute arises
- Review the contract’s dispute resolution steps. Many forms require mediation or arbitration.
- Collect documentation showing you met deadlines and provided proper notice.
- Request a joint written release if both parties agree on how to distribute the deposit.
- Consult a real estate attorney for case-specific guidance before pursuing litigation.
For neutral, consumer-focused information on escrow and release processes, the ALTA consumer resources are helpful.
Avoid wire fraud
Wire transfers are common and convenient, but always confirm wiring instructions by calling the escrow holder at a trusted phone number you independently verify. Do not rely solely on email instructions. If anything changes last minute, pause and verify before sending funds.
Local market check
Deposit strength is relative to the market. Days on market, multiple-offer frequency, and segment demand change with seasonality. Review the current Traverse City market overview data to understand speed and competition, then tailor your deposit and timelines accordingly.
Work with a local guide
A thoughtful earnest money strategy can improve your odds in a competitive Traverse City offer while keeping your protections intact. If you are weighing deposit size, contingency timelines, or escrow logistics, you deserve clear answers and a steady plan.
For local guidance tailored to your goals, connect with Amanda Theodoran. You will get boutique, hands-on support backed by deep Traverse City expertise and a clear process from offer to closing.
FAQs
How much earnest money should I plan for in Traverse City?
- Many buyers start with a flat amount or 1 to 3 percent of the price, then adjust for competition and property type. Your agent can help right-size the figure for current conditions.
Who holds earnest money for Michigan purchases?
- The purchase agreement names the holder. Common options include a brokerage trust account, a title or closing company escrow account, or an attorney escrow account. Always get a dated receipt.
When is my earnest money due after an offer is accepted?
- Your contract controls the deadline. Many local agreements expect delivery within a short window, often 24 to 72 hours after acceptance. Deliver on time and keep proof of deposit.
Can I get earnest money back after a failed inspection in Michigan?
- If the contract includes an inspection contingency and you terminate in writing within the inspection period, the deposit is generally refundable. Missing the deadline can put your funds at risk.
What happens to my deposit if my financing falls through?
- If you applied in good faith and cannot secure financing as stated in the agreement, timely written termination under the financing contingency usually protects your deposit.
How are earnest money disputes resolved in Michigan?
- Many contracts require mediation or arbitration before court. Escrow holders may hold funds until both parties give written instructions or a court orders release. Documentation and deadlines are critical.
