Thinking about writing an offer in Sacramento and wondering how earnest money works? You are not alone. This small but important deposit can shape how strong your offer looks and how protected you are if plans change. In this guide, you will learn what earnest money is, how much buyers in Sacramento typically put down, when you can get it back, and smart steps to protect your funds. Let’s dive in.
What earnest money is
Earnest money is a deposit you provide after your offer is accepted to show the seller you are committed to buying. It sits in a neutral escrow account and is credited toward your closing costs or down payment at closing.
Sellers request earnest money because it adds financial assurance. It helps cover their risk while they take the home off the market during escrow. If you follow the contract and close, the money becomes part of what you already plan to bring to the table.
When you pay it in Sacramento
In Sacramento, the timeframe for delivering your earnest money is set in the offer and is commonly 24 to 72 hours after acceptance. You will deliver the funds to an escrow or title company that acts as a neutral holder. Delivery methods include cashier’s check, personal check per escrow rules, or a wire transfer.
If you prefer to wire funds, use strong safety checks due to wire fraud risk. Always confirm wiring instructions over the phone using a trusted number for the escrow company, not the phone number in an email.
How much to deposit in Sacramento
There is no one-size number that fits every home or market cycle. In Sacramento, buyers often see deposits around 1 to 3 percent of the purchase price, or a flat amount such as 2,500 to 20,000 dollars. In a competitive situation, you might offer more to stand out. In a slower market, you may keep it closer to the low end of that range.
Local norms shift by neighborhood and season. Your exact strategy should match the home’s price point, competition, and your comfort with risk. A knowledgeable local agent can help you choose a number that supports your goals without overexposing you.
Factors to right-size your deposit
- Market conditions. Hot listings and low inventory may call for higher deposits.
- Price point. Higher-priced homes often use higher deposits even when the percent is similar.
- Your risk tolerance. Bigger deposits can strengthen your offer but increase potential loss if you default outside contingencies.
- Your contingencies. Strong contingencies reduce risk and can support a smaller deposit.
- Lender rules. Your lender may ask for documentation showing the source of your funds.
Where your money goes and how it is protected
Your deposit is held in a trust account by a licensed escrow or title company. These firms follow fiduciary rules and only release funds based on written instructions, a mutual release, or a legal order. In California, escrow and related financial services fall under state oversight. You can request the escrow company’s address and license details to verify who is holding your funds. For more on state oversight, review the California Department of Financial Protection and Innovation’s guidance on escrow and licensing.
If a dispute arises, escrow typically holds the funds until both parties agree in writing or a court or arbitrator directs disbursement. Escrow can also interplead funds with the court if needed.
Wire transfer safety
Real estate wire fraud is a real risk nationwide. Follow these safeguards:
- Confirm wiring instructions by calling the escrow company using a number you already trust.
- Do not rely on emailed instructions without a call-back confirmation.
- Consider delivering a cashier’s check in person if you are unsure about wiring.
- After sending funds, confirm receipt with escrow and save your receipt.
For background on wire fraud risks and prevention steps, see the FBI’s consumer advisory on real estate wire fraud.
When you get it back or could lose it
Your contract spells out when you can cancel and keep your earnest money. Here are the most common protections and outcomes:
Buyer-friendly contingencies
- Inspection contingency. You can cancel within the inspection period or request repairs or credits.
- Loan contingency. If you cannot obtain financing under the agreed terms and give timely notice, you can cancel and receive a refund.
- Appraisal contingency. If the appraisal comes in low, you may cancel, renegotiate, or bring extra funds.
- Sale-of-home or title-related contingencies. If allowed by the contract, these can also protect your deposit.
When you cancel properly within a valid contingency period, you typically receive a full refund of your earnest money.
If you cancel outside contingencies
If you cancel after contingencies are removed or you fail to perform without a valid contingency, you may forfeit the deposit. Many California residential purchase agreements include an optional liquidated damages clause, which can allow the seller to keep the deposit as their agreed damages up to a stated limit. If that clause is not used or the seller chooses a different path, they may pursue other remedies such as breach of contract claims.
Escrow will not release funds unless allowed by the contract, a mutual written release, or a court or arbitrator’s order. Standard California Association of Realtors forms also include dispute resolution procedures, which can involve mediation or arbitration.
If the seller breaches
If the seller defaults, your typical remedies include the return of your earnest money and, depending on your contract and situation, other legal remedies. The exact steps depend on the purchase agreement and timelines.
Smart steps before you make an offer
A little preparation goes a long way. Use this checklist to protect your deposit and present a strong offer:
- Confirm loan details with your lender. Nail down your loan terms, how your loan contingency will work, and whether your earnest money source meets lender guidelines.
- Decide on a deposit strategy. Balance competitiveness with risk. In a hot Sacramento listing, consider a higher deposit paired with protections you are comfortable with.
- Verify the escrow holder. Ask for the escrow officer’s name, company, address, and license details. Confirm how to deliver funds safely.
- Plan your timeline. Know your deposit deadline, inspection period, loan and appraisal dates, and closing target. Put reminders on your calendar.
- Keep clean records. Save copies of checks, wire confirmations, and escrow receipts.
Questions to ask your agent and escrow officer
- What are typical deposit amounts for this neighborhood and price range right now?
- Where exactly will the funds be deposited, and who is the escrow or title officer?
- Which contingencies will we include, and what are the deadlines for removal?
- How will my deposit be credited at closing?
- What are the escrow instructions if there is a dispute about the deposit?
- What steps do you recommend to avoid wire fraud in this transaction?
Local perspective for Sacramento buyers
Sacramento’s market can shift quickly by area and time of year. Close-in neighborhoods and popular suburbs can move fast in a seller-favored cycle, which may increase the typical deposit. In a slower stretch, buyers often have more room to keep the deposit modest with full contingencies. The right approach is the one that matches the home, your finances, and your risk tolerance.
If you are navigating a purchase in Sacramento or the northeast suburbs, you do not need to figure this out alone. With the right strategy, your earnest money can strengthen your offer without adding unnecessary risk.
Ready to talk through deposit strategy, contingencies, and how to protect your funds? Reach out to Melissa Lamberti for clear, local guidance from offer to closing.
FAQs
What is earnest money in a Sacramento home purchase?
- It is a good-faith deposit you deliver after your offer is accepted. It is held in escrow and credited toward your down payment or closing costs when you close.
How much earnest money do Sacramento buyers usually put down?
- Many buyers offer about 1 to 3 percent of the price or 2,500 to 20,000 dollars, with higher amounts in competitive situations and lower in slower markets.
When do I pay earnest money in Sacramento?
- The purchase agreement sets the deadline. A common window is 24 to 72 hours after the seller accepts your offer.
Will I lose my earnest money if my loan is denied?
- If you have a valid loan contingency and follow the timing and notice rules in the contract, you should be entitled to a refund.
What protects my earnest money during escrow?
- A licensed escrow or title company holds the funds in a trust account and only releases them per written instructions, a mutual release, or a legal order. You can verify escrow licensing and consumer guidance through the state.
How do I avoid wire fraud when sending earnest money?
- Call the escrow company using a known phone number to confirm instructions, avoid relying on email alone, and consider a cashier’s check if you are unsure about wiring. Review the FBI’s guidance on real estate wire fraud for more tips.
California Department of Financial Protection and Innovation guidance on escrow
