You found a home you love in Mound, and now the seller wants “earnest money.” What is it, how much should you offer, and what happens if things change? Buying around Lake Minnetonka often moves fast, and a clear plan for earnest money can help you compete with confidence.
In this guide, you’ll learn what earnest money is in Minnesota, typical amounts for the West Metro, how timelines work, and how contingencies protect your deposit. You’ll also get practical tips to avoid common pitfalls. Let’s dive in.
What earnest money means
Earnest money is a deposit you make after your offer is accepted to show you intend to buy. It sits in escrow and is usually credited to you at closing. If you default under the contract, the seller may be able to keep it depending on the agreement.
A licensed escrow holder keeps the funds secure. In Minnesota, this is typically a title or escrow company, a closing attorney, or sometimes a broker’s trust account. The purchase agreement spells out who holds the money, when it is due, and the rules for return or forfeiture.
In the Lake Minnetonka corridor, price points can be higher and demand can be seasonal. In multiple-offer situations, buyers often increase earnest money to stand out. In slower conditions, smaller deposits may work.
How much to expect in Mound
There is no fixed number. You and the seller agree to the amount in the purchase agreement. Common approaches include a flat amount or a percentage of the price.
- Lower-priced or less competitive homes: often $1,000 to $3,000.
- Mid-range single-family homes: often $3,000 to $10,000, or roughly 1% of the price.
- Higher-priced or competitive listings, including desirable lake homes: buyers sometimes offer 2% or more.
Helpful planning examples:
- $300,000 home → about $3,000 at 1%.
- $500,000 home → about $5,000 at 1%.
- $1,000,000 home → about $10,000 at 1%.
Your amount can also reflect your offer strategy. More contingencies can support a smaller deposit. Cash buyers may offer more to signal strength.
Minnesota timelines and process
Your Residential Real Estate Purchase Agreement sets the details for earnest money. It states the amount, escrow holder, and the deposit deadline.
- Deposit deadline: Often a set date or a short period after acceptance, such as within 3 business days. The contract controls the exact deadline.
- How you pay: Wire transfer is common, and certified or personal checks may be allowed depending on the escrow holder. Some title companies require certified funds for larger amounts.
- Before closing: The money sits in escrow. If the sale closes, it is credited to your down payment or closing costs.
- If you cancel: If you cancel under a valid contingency and follow the contract’s steps, your earnest money is generally returned.
- If you default: The seller may keep the deposit as liquidated damages if the contract provides for it.
Disagreements about who gets the deposit often require a signed release. Without that, contracts can direct parties to mediation, arbitration, or court. Your specific agreement governs the process.
Key contingencies that protect you
Contingencies give you the right to cancel and recover your deposit if certain conditions are not met in time. The language and deadlines in your contract control the outcome.
- Inspection contingency: You can inspect the home and negotiate repairs or cancel within the inspection period. Typical windows are 5 to 10 days, but you can negotiate shorter or longer.
- Financing contingency: If your lender does not issue a commitment by the deadline, you can often cancel and recover your deposit if you followed the contract and acted in good faith.
- Appraisal contingency: If the appraisal is low and you cannot reach a new agreement with the seller, you can usually cancel within the terms.
- Title review: If title issues are not resolved within the agreed window, you can cancel.
- Sale-of-home contingency: Your purchase depends on selling your current home. This can lengthen timelines and may be less attractive in multiple-offer settings.
If you remove a contingency or miss a deadline, your deposit may become nonrefundable except for other protections that remain in the agreement.
Smart strategies in the West Metro
Use the local context to shape your plan, especially for lake-area properties.
- Right-size your deposit: In Mound and around Lake Minnetonka, use about 1% as a starting point for budgeting, and adjust for competition.
- Be specific in writing: Your offer should name the escrow holder, deposit amount, deadline, delivery method, and all contingency timelines.
- Move fast on inspections: Schedule right away to keep your options open during the inspection period.
- Stay ahead with your lender: Begin underwriting early so you can satisfy financing and appraisal milestones on time.
- Document everything: Keep receipts for your deposit and send notices in writing when using a contingency to cancel.
Wire safety and fraud prevention
Wire-fraud schemes target real estate closings. Protect yourself by verifying wiring instructions with the escrow or title company. Use a phone number you find independently, not one from an email link. Confirm account and routing details before sending funds. Certified checks can be a backup if the escrow holder allows them, though wires are often preferred for speed.
When money is refunded or forfeited
Here are examples to help you think through risk:
- Usually refundable: You cancel within the inspection window under the inspection contingency; your financing is denied and you cancel under the financing contingency; title defects are not cured.
- Potentially forfeited: You waive contingencies and later cancel for reasons the waived contingency would have covered; you cannot close for reasons not protected in the contract and not caused by the seller.
The purchase agreement controls these outcomes. If you are unsure which option applies, review the dates and follow the notice instructions in your contract.
Closing and next steps
At closing, your earnest money is credited to your cash to close and appears on the closing statement. Keep those records for your files. Before you get there, focus on clean timelines, quick inspections, lender coordination, and secure funds.
Work with a local pro
A Lake Minnetonka purchase moves smoothly when you have a local plan for earnest money, timelines, and protections. If you want a clear strategy for the Mound market, a well-written offer, and guidance through escrow, reach out to Pete Ice. Our team blends neighborhood insight with a consultative process to help you buy with confidence.
FAQs
What is earnest money in Minnesota real estate?
- It is a buyer deposit held in escrow after offer acceptance, applied at closing or potentially kept by the seller if the buyer defaults as defined by the contract.
How much earnest money is typical in Mound, MN?
- Many buyers budget about 1% of the price; common ranges run from $1,000 to $10,000, with higher or competitive lake listings sometimes at 2% or more.
When is earnest money due in Minnesota?
- The purchase agreement sets the deadline, often a set date or a short period like within 3 business days after acceptance.
Who holds earnest money for a Lake Minnetonka home?
- A licensed title or escrow company, a closing attorney, or a broker’s trust account typically holds the funds per the contract.
How do contingencies protect my deposit?
- If you cancel within the agreed time under inspection, financing, appraisal, or title contingencies, you can usually recover your earnest money following the contract steps.
What should I do to avoid wire-fraud on my deposit?
- Verify wiring instructions by calling the escrow holder at a trusted phone number you source yourself, and confirm details before sending funds.
