Making an offer on a home? You will hear about earnest money right away, and it can feel confusing. You want to put your best foot forward without risking more than you should. In this guide, you will learn exactly what earnest money is, how escrow works in Connecticut, what deposit sizes are typical, and when funds are refundable. Let’s dive in.
What earnest money means in Connecticut
Earnest money is a good-faith deposit you include with your offer. It shows the seller you are serious. If the sale closes, that money is usually credited to your down payment or closing costs.
This deposit also sets key timelines in motion. Once your offer is accepted, your contract will outline when inspections, financing, and other steps must happen. If something goes wrong and you cancel under a valid contingency within the allowed time, your deposit is typically returned.
Connecticut handles earnest money primarily through the purchase-and-sale agreement and general contract and trust-account rules. There is no set amount required by law. The contract controls who holds the money, how it is handled, and what happens if either side defaults.
Typical deposit amounts
There is no one-size-fits-all deposit. Amounts are market-driven and scale with price and competition. As of 2025, common industry examples in Connecticut include the following market ranges. Treat these as examples, not legal rules, and confirm with your agent based on the property and offer climate:
- Lower-priced homes: 1% of purchase price.
- Mid-priced homes: 1-3% of purchase price.
- Higher-priced homes or competitive situations: Buyers sometimes offer a meaningful five-figure deposit or a percentage of price (for example, around 1% or more) to signal seriousness.
Fairfield County towns with a smaller inventory and higher average sale prices than the state median, deposits here often sit on the higher end of those ranges. In competitive situations, you may see larger deposits, quicker deposit timelines, or limited contingencies used to stand out. Each of those choices increases risk, so weigh them carefully and talk with your agent and attorney before you commit.
Who holds your deposit and how escrow works
The contract should name the escrow holder and the account where funds will be placed. In Connecticut, attorneys are routinely involved in residential transactions, and it is common for a closing attorney to hold the deposit. A listing broker’s trust account may also hold the funds.
Escrow holder in CT
- A closing attorney’s escrow account (very common in Connecticut).
Delivery, receipts, and timing
Your contract will set the delivery method and deadlines. Buyers typically provide certified funds or a wire transfer. Many Connecticut contracts call for the initial deposit within a short window after mutual acceptance, often 2 to 5 business days. Some agreements include a second deposit later, such as after inspections or financing approval. Make sure you receive a written receipt showing the amount, date, and the account where funds were deposited.
Escrow holders keep detailed records of deposits, withdrawals, and disbursements. Funds are released only under the terms in your contract or by a signed escrow release.
Interest and large deposits
Whether the escrow account is interest-bearing should be spelled out in your contract or escrow agreement. Practices vary. If interest is expected on a large deposit, clarify who receives it and when.
When earnest money is refundable
Your deposit is generally refundable if you properly use a contingency in your contract. To protect yourself, follow the exact notice procedures and deadlines in the agreement.
Contingencies that protect you
Common buyer protections include:
- Inspection contingency. You can inspect, request repairs or credits, or cancel within the inspection window if issues arise.
- Mortgage or financing contingency. If you are unable to secure financing within the stated time, you can cancel as allowed by the contract.
- Appraisal contingency. If the property appraises below price and you cannot resolve the gap under the contract terms, you can cancel.
- Title contingency. You can cancel if the seller cannot deliver clear title and cannot cure within the allowed period.
- Sale-of-home contingency. If your current home does not close within the agreed time, you may cancel if your contract provides for it.
If you cancel under a valid contingency and on time, the escrow holder typically returns your deposit. Always check your contract’s notice method and any cure periods.
When you could forfeit the deposit
If you default after contingencies are waived or expire, the seller may claim the deposit as liquidated damages as allowed by the contract. Some contracts also allow the seller to pursue other remedies. This is why shortening or waiving contingencies to compete should be weighed carefully. A stronger offer can help you win, but it can also increase the risk of losing your deposit if the deal falls apart for a reason not covered by a contingency.
Refunds and disputes
When a valid contingency triggers a termination, the escrow holder releases funds per the agreement, often back to the buyer. If the buyer and seller disagree about who gets the deposit, the funds usually stay in escrow until both sides sign a release or the dispute is resolved through mediation, arbitration, or court. Many Connecticut contracts include a dispute-resolution clause.
Offer strategies and risk
In a low-inventory, higher-price market, sellers may favor:
- Larger earnest money amounts.
- Faster deposit timing (same day or within 24 to 48 hours).
- Shorter inspection and financing periods.
- Limited or waived contingencies.
These tactics can make your offer more competitive, but they raise your exposure. Before you limit protections, review the risks with your agent and attorney. If you increase the deposit, be sure you can meet your financing and timing commitments.
Buyer checklist: protect your deposit
- Confirm, in writing, who will hold your deposit and the escrow account details.
- Clarify the exact deposit amount and when each installment is due.
- Spell out contingencies with clear deadlines and notice procedures.
- Get a written receipt and confirm funds have reached escrow.
- Avoid waiving protections unless you fully understand the risk.
- If wiring funds, verify wire instructions by phone using a trusted number. Do not rely only on email to avoid fraud.
Seller checklist: set clear expectations
- Request a meaningful deposit that signals commitment without discouraging strong buyers.
- Specify who holds the deposit and the timing for each installment.
- Include clear escrow disbursement language and a dispute-resolution process.
- Consider a two-step deposit structure: an initial deposit soon after acceptance and a second deposit after a milestone like inspections.
Real-world examples
- Scenario A (refund): You inspect within the deadline, discover substantial structural issues, and cancel under the inspection contingency with proper notice. Your deposit is returned.
- Scenario B (negotiate): Inspections find defects, and you negotiate a repair credit. The deal continues, and your deposit applies to closing. If the sale later fails under a valid contingency, your contract governs the refund.
- Scenario C (forfeit risk): You remove your financing contingency to compete, then your loan falls through for a reason not covered by the contract. The seller may claim your deposit.
- Scenario D (dispute): You cancel citing inspection concerns, but the seller disputes your notice. The escrow holder keeps the funds in the account until both sides sign a release or the dispute is resolved.
Final thoughts
Earnest money is a useful tool that helps sellers identify serious buyers and helps you set a clear path to closing. The right amount and timeline depend on price, property condition, days on market, and how competitive the field is. Get the terms right on day one, follow every deadline, and keep your protections intact unless you are fully comfortable with the trade-offs.
If you want local, hands-on guidance as you craft a competitive, safe offer, reach out to Marlee Book. You will get clear advice tailored to your situation and the current market.
FAQs
How much earnest money should I offer in CT?
- There is no fixed rule. As of 2025, deposits scale with price and competition. For higher-priced homes, buyers often use five-figure deposits or a meaningful percentage of price to show commitment. Confirm the right amount with your local agent and attorney.
Where is earnest money held in Connecticut purchases?
- The contract names the escrow holder, commonly the listing broker’s trust account or a closing attorney’s escrow account. Always get a written receipt with the deposit details.
Is earnest money refundable after a bad inspection?
- Yes, if your contract includes an inspection contingency, you complete inspections within the window, and you deliver proper notice to cancel within the deadline. If you waive the contingency, refundability is not automatic.
What if a seller refuses to release my deposit?
- If there is a dispute, the escrow holder generally keeps funds in escrow until both parties sign a release or the dispute is resolved through mediation, arbitration, or court. Consult your attorney promptly about next steps.
How long are earnest money funds held before closing?
- Usually until closing, when the deposit is applied to your costs, or until there is a mutual release or dispute resolution if the transaction does not close.
