Earnest Money in Connecticut Explained

Wondering how much earnest money you should offer in East Lyme, and what happens to it if the deal falls through? You are not alone. This deposit can help you win the home you love, and it can also be protected if you follow your contract. In this guide, you will learn how earnest money works in Connecticut, typical amounts in East Lyme, when it is refundable, and how to use it to strengthen your offer without taking on unnecessary risk. Let’s dive in.

What earnest money means in Connecticut

Earnest money, sometimes called a good‑faith deposit, is your way of showing a seller you intend to close. It is paid after your offer is accepted and applied to your purchase price at closing. It is not a separate fee.

In Connecticut, the rules for your deposit are set by your purchase contract. Standard forms used across the state outline when the deposit is due, who holds it, and how disputes are handled. Connecticut also regulates how brokers and escrow holders handle client funds. The exact terms in your contract control what happens next.

Who holds your deposit

Your contract will name the escrow holder. In Connecticut, it is common for funds to be held by:

• The listing broker in a trust or escrow account
• Your or the seller’s attorney
• A title or settlement company
• Another agreed escrow agent

Always get a written receipt that shows the amount, date, and the account where funds are held.

Typical amounts in East Lyme

For East Lyme and nearby shoreline towns, common ranges look like this:

• $1,000–$2,500 for lower‑priced homes or modest offers
• About 1–2 percent of the purchase price for most single‑family homes
• 2–3 percent (or more) in competitive or higher‑value situations

Shoreline markets can be seasonal and sometimes competitive. In busier months or for well‑positioned properties, sellers may expect larger deposits and faster deadlines. Cash buyers may offer smaller deposits if other terms are strong. Financed buyers sometimes increase the deposit to stand out.

When you can get it back

Whether your deposit is refundable depends on your contract and timing. You generally keep your refund rights when you cancel within active contingencies and meet deadlines. Common protections include:

• Inspection contingency if significant issues are found and you cancel on time
• Mortgage or financing contingency if you cannot obtain financing within the set period
• Appraisal contingency if the value comes in short and you cancel per the contract
• Title contingency if clear title cannot be delivered
• Sale‑of‑home contingency if your existing sale does not complete under agreed terms

If you cancel for a reason not covered by an active contingency, the seller may keep the deposit. Deadlines are critical, so track them closely.

Timing and delivery basics

Your contract will state when the deposit is due. In many cases it is due within a short window after acceptance, such as 24–72 hours or another set number of days. Deliver on time to avoid a technical default.

Confirm acceptable payment methods, such as certified check or wire. If wiring, verify instructions independently by calling a known number for the escrow holder. Keep your receipt once funds are deposited.

How deposits affect offer strength

A larger earnest deposit can signal serious intent and help your offer stand out. Sellers weigh it alongside price, financing terms, inspection approach, and closing timeline.

There is a tradeoff. A bigger deposit gives the seller confidence but increases the amount at risk if you default outside your contract protections. If you want to strengthen your offer without giving up key contingencies, raising earnest money is often safer than waiving inspection or appraisal outright.

Some contracts include a liquidated damages clause that lets the seller keep the deposit if you default. Know your exposure before you raise the amount.

Protect your deposit

Take simple steps to safeguard your funds:

• Track contingency dates from day one and schedule inspections immediately
• Apply for your loan right away and stay in close contact with your lender
• If a contingency triggers, follow the contract’s termination steps within the deadline and document your reason
• Use a qualified inspector and keep written records of all notices and receipts

For wires, verify instructions by phone using a trusted, publicly listed number. Avoid acting on email instructions alone.

East Lyme buyer checklist

Use this quick list to stay on track:

• Confirm the typical deposit for your price range and neighborhood
• Get a lender pre‑approval ready before you write
• Choose a deposit amount that fits your risk tolerance: 1–2 percent is common, more if competition is high
• Name the escrow holder in the contract and set the delivery deadline
• Schedule inspections immediately after acceptance
• Document every step and keep all receipts and emails

If a dispute happens

Start with your contract and timeline. Gather your documents, including inspection reports, lender letters, emails, and receipts. Many issues resolve through agent or attorney discussion and a mutual release.

If you cannot reach agreement, follow the dispute resolution steps in your contract. These may include mediation, arbitration, or court. For legal questions or next steps, consult a Connecticut real estate attorney.

Ready to discuss the right deposit strategy for your East Lyme search? Connect with the trusted local advisors at The Thomas & LaBonne Team to align your terms with current market expectations and protect your interests from offer to closing.

FAQs

What is earnest money in Connecticut?

• It is a buyer’s good‑faith deposit submitted after offer acceptance and applied to your purchase at closing, with refund rights and deadlines defined by your contract.

How much earnest money for a $500,000 East Lyme home?

• Many buyers offer about 1–2 percent ($5,000–$10,000), and may go higher if competition is strong for a specific property.

Who usually holds earnest money in East Lyme?

• The listing broker’s escrow account, a party’s attorney, or a title/settlement company typically holds the funds, as named in your contract.

When is earnest money refundable in Connecticut?

• It is generally refundable when you cancel within active contingencies and meet all notice deadlines set in your purchase agreement.

Does a bigger deposit make my offer stronger?

• Often yes. A larger deposit signals commitment, but balance it with contingency protections so you are not taking on unnecessary risk.