Wondering how much earnest money to put down on a Petaluma home? You want to make a strong offer without putting more of your cash at risk than you need to. In this guide, you’ll learn what earnest money is, typical local amounts, how escrow handles your deposit, and how contingencies protect or expose it. Let’s dive in.
What is earnest money?
Earnest money is a good-faith deposit you make when your offer is accepted. It shows the seller you are serious and is usually credited to your down payment and closing costs at closing. The funds are held by an impartial third party, typically an escrow or title company, under the purchase contract.
In California, the purchase agreement sets the deposit amount, where it is held, when it is due, and what happens if the deal cancels. Earnest money is not an automatic, nonrefundable fee. Whether you get it back depends on your contract contingencies and whether you default.
Typical deposits in Petaluma
Local expectations
In many Petaluma and Sonoma County sales, buyers offer about 1–3% of the purchase price as earnest money. Stronger offers often land in the 2–3% range. In very competitive situations with multiple offers, deposits of 3–5% or more are sometimes used to show higher commitment.
What affects the percentage:
- Price point: higher-priced homes may see lower percentages, but similar dollar amounts.
- Market balance: when inventory is tight, sellers may expect larger deposits and quicker contingency timelines.
- Financing type: cash buyers sometimes use smaller deposits, paired with shorter escrows.
- Seller guidance: some listings specify preferred deposit size and timing.
Dollar examples
These are simple examples to help you visualize the math. Your situation may differ.
- If the price is $700,000: 1% = $7,000; 2% = $14,000; 3% = $21,000.
- If the price is $900,000: 1% = $9,000; 2% = $18,000; 3% = $27,000.
- If the price is $1,200,000: 1% = $12,000; 2% = $24,000; 3% = $36,000.
Remember, deposit size is only one part of your offer. Price, contingencies, timing, and terms like rent-back often matter just as much.
How escrow holds funds
Where the money goes
Your deposit is sent to the escrow or title company named in your contract, or sometimes to the listing broker per the agreement. Escrow companies hold the funds in regulated trust accounts until closing or cancellation under the contract.
Timing and payment forms
The purchase agreement sets the delivery deadline, commonly within a few business days after acceptance. Accepted forms usually include wire transfer, cashier’s check, or certified check. Personal checks may be allowed but may need to clear.
Wire fraud safeguards
Wire fraud is a real risk. Before sending a wire, call the escrow company using a phone number you obtain independently, not from the email with instructions. Confirm the account name and number with a live representative. Do not rely on a single email for wiring details.
If the deal cancels
If the sale closes, your deposit is credited to your cash to close. If the sale ends under a valid contingency or mutual cancellation, escrow releases the funds as the contract directs. If there is a dispute, escrow will hold the money until both parties agree, a court orders, or an arbitration or mediation outcome directs release.
Contingencies and your deposit
Common contingencies
These contract protections often determine whether your deposit is refundable:
- Inspection: cancel within the inspection period if issues are unacceptable.
- Financing: cancel if loan approval is not obtained within the set timeline.
- Appraisal: cancel or negotiate if the appraisal is below the contract price.
- Title and HOA documents: cancel if material issues cannot be resolved.
- Sale-of-home: less common in competitive markets but protects if you need to sell first.
Removing contingencies
You remove or waive contingencies in writing. Once you do, you have far less ability to cancel and retain your deposit. Shorter timelines can make an offer more attractive but increase risk. Track deadlines carefully and document each step to preserve your rights.
Disputes and remedies
If you default after contingencies are removed, the seller may keep the deposit as liquidated damages if your contract includes that clause. If the seller breaches, you typically receive your deposit back and may have other remedies available under the contract.
Offer strategy for buyers
Levers that impress sellers
- Larger deposit: signals commitment, especially in multiple-offer scenarios.
- Faster delivery: proposing 24–48 hour deposit delivery can be persuasive.
- Contingency terms: tighter inspection, appraisal, or loan timelines can help.
- Cash strengths: cash buyers may use smaller deposits but faster closes.
- Non-price terms: flexible close date, shorter escrow, or rent-back can be decisive.
Smart risk management
- Align deposit size with your comfort level and local norms.
- Consider a staged deposit schedule if acceptable to the seller, such as a modest initial deposit with a larger secondary deposit after removing key contingencies.
- Use appraisal gap language or escalation clauses as alternatives to simply increasing the deposit.
- Review contingency timelines with your lender and inspector before tightening them.
- Verify escrow wiring instructions by phone before sending funds.
Quick checklist
- Define your target price, then estimate 1–3% for a typical deposit.
- Choose a deposit size that supports your offer without overexposing cash.
- Confirm who will hold escrow and how you will deliver funds.
- Map every contingency deadline and plan to meet them.
- Do not waive protections without understanding the risk to your deposit.
- Call escrow to verify wiring details before initiating any transfer.
Buying in Petaluma is competitive at times, but you can craft a confident, smart offer. If you want help matching your deposit and contingency strategy to the current market and your goals, connect with Jen Birmingham for clear guidance and local expertise.
FAQs
Is earnest money refundable in California home purchases?
- It depends on your contract. If you cancel within inspection, appraisal, financing, title, or other agreed contingencies and follow the process, your deposit is typically refundable; if you default after removing contingencies, you may forfeit it.
How much earnest money should I offer in Petaluma?
- Many buyers start with 1–3% of the price, move to 2–3% for stronger offers, and sometimes 3–5% in very competitive situations; tailor your number to property demand and your risk tolerance.
How fast do I have to deliver my deposit after offer acceptance?
- Your purchase agreement sets the deadline, often within a few business days of acceptance; faster delivery, such as 24–48 hours, can help your offer stand out.
Where should I send my earnest money deposit in Sonoma County deals?
- Send it as directed in your contract, usually to the escrow or title company, or sometimes to the listing broker; wires or cashier’s checks are common, and you should verify wiring details by phone.
What happens to my deposit if the seller cancels or title is unclear?
- If the seller breaches or title issues cannot be cured under the contract, your deposit is typically returned and you may have additional remedies provided by the agreement.
Can the seller keep my deposit and still sue me if I default?
- Depending on your contract, the seller may keep the deposit as liquidated damages or pursue additional remedies, though many California forms limit remedies to the deposit when both parties initial that clause.
Are escrow trust accounts insured like bank deposits?
- No. Escrow trust accounts are not FDIC insurance vehicles; they are regulated under state rules, so verify the escrow company’s licensing and safeguards.
