Have you heard the term “earnest money” and wondered how it works in Colorado Springs? You are not alone. This small but important deposit can shape your offer, your risk, and your path to closing. In this guide, you will learn exactly what earnest money is, typical local amounts, when it is refundable, and how to avoid losing it. Let’s dive in.
What is earnest money?
Earnest money, also called an earnest money deposit or EMD, is cash you put down with your offer to show a seller you are serious about buying. It is not a fee. If you close, the deposit is credited toward your purchase price or closing costs. If you do not close, refund or forfeiture depends on the contract and deadlines.
How it works in Colorado Springs
In Colorado, your purchase contract sets the amount, who holds the funds, and when you must deliver them. The deposit is kept in a trust account, separate from operating funds. Treat the timelines in your contract as hard deadlines.
Who holds your deposit
- A title or escrow company is most common in Colorado Springs.
- A real estate brokerage trust account can hold funds if the contract says so.
- An attorney trust account may be used in special cases.
When you deliver it
- Contracts here often require delivery within 1 to 5 business days after mutual acceptance.
- Always get a receipt showing the date received and where the funds are held.
How it shows at closing
- If you close, the deposit is applied to your cash to close.
- If the deal ends under a valid contract contingency, the escrow holder returns funds per the contract’s instructions.
How much earnest money is typical locally
Earnest money amounts in El Paso County vary with price point and competition.
- In lower-competition situations, you may see $1,000 to $5,000.
- A common baseline is about 1 to 2 percent of the purchase price.
- In multiple-offer settings, deposits can rise to 3 percent or more, sometimes several thousand to tens of thousands of dollars on higher-priced homes.
What drives the amount:
- Market competition at the time you write your offer.
- Purchase price and property type.
- Your financing profile and lender timelines.
- Strategy choices, like a stronger signal for cash offers.
When earnest money is refundable
Refundability hinges on your contract contingencies and your timing. If you act within the agreed periods and give proper written notice, your deposit is usually returned.
Common contingencies that protect you:
- Inspection period. You may inspect, request repairs, or terminate within the written deadline.
- Financing contingency. If you cannot obtain the loan as outlined and you terminate properly, you keep your deposit.
- Appraisal contingency. If the appraisal is low and the parties cannot resolve it, you can terminate within the appraisal period and keep funds.
- Title and HOA review. If you find unacceptable title or association issues within the review period, you can object or terminate.
- Other agreed clauses. Examples include the sale of your current home or feasibility studies for new builds.
How to preserve your refund:
- Meet every deadline in writing and use the contract forms for objections or termination.
- Deliver notices exactly as the contract instructs and keep proof of delivery.
- Do not remove contingencies unless you are prepared to close without them.
When you could forfeit the deposit
You risk losing earnest money if you default without a contract-allowed reason or miss your notice deadlines.
Situations that raise forfeiture risk:
- Failing to close after waiving contingencies.
- Missing deposit, inspection, appraisal, or financing deadlines.
- Backing out for a reason not covered by the contract.
How the seller may respond:
- Many Colorado contracts include a liquidated damages option. If selected and you default, the seller can retain the earnest money as the sole remedy.
- In fewer cases, a seller could pursue other remedies, which can take more time to resolve.
Disputes and escrow holds:
- If buyer and seller disagree, the escrow holder will usually keep funds in the trust account until there is mutual written release, mediation or arbitration per the contract, or a court order.
Typical timelines in El Paso County
These are common ranges. Your contract controls the exact dates.
- Earnest money delivery: 1 to 5 business days after acceptance.
- Inspection period: often 5 to 10 days.
- Appraisal period: typically aligns with lender timelines after acceptance.
- Loan commitment: often 21 to 30 days.
- Title and HOA document review: commonly 3 to 7 days after receipt.
Buyer tips to protect your deposit
- Get preapproved before you shop so financing timelines match your contract.
- Deliver earnest money fast and save your receipt.
- Track every deadline and send notices in writing per the contract.
- Think carefully before waiving inspection, appraisal, or financing protections.
- Keep close communication with your agent, lender, and title company.
Seller tips for handling earnest money
- Put the amount and delivery deadline in the offer and verify deposit receipt.
- Know whether your contract selects liquidated damages and what that means.
- Do not release funds unless the contract directs it or both parties sign a mutual release.
- Stay open to reasonable negotiation if a buyer raises a valid, timely objection.
Special situations to know
- Cash offers. Sellers may ask for larger deposits or separate nonrefundable option fees to show commitment.
- New construction. Builders often use their own deposit schedules and add-on option fees.
- VA and FHA loans. Earnest money is handled like other loans, but timelines can differ with lender steps.
- Short sales or foreclosures. Third-party approvals can affect how and when deposits are handled.
The bottom line for Colorado Springs
Earnest money shows commitment and helps your offer stand out. In the Springs, amounts often range from a few thousand dollars to 1 to 2 percent of price, and more when competition is high. Your refund rights live in your contract, your contingencies, and your ability to meet every deadline. With clear timelines and a strong plan, you can use earnest money to your advantage without taking on unnecessary risk.
Ready to talk strategy for your next move in El Paso County? Connect with our local team at Colorado Springs Collective to align your offer terms and timelines with the current market.
FAQs
How much earnest money should I offer in Colorado Springs?
- Many buyers start around 1 to 2 percent of the price or $1,000 to $5,000 in less competitive settings, then adjust based on price point and competition in El Paso County.
Where is my earnest money held in Colorado transactions?
- It is typically held in a title or escrow company trust account, or in a brokerage trust account if your contract specifies, separate from operating funds.
When can I get my earnest money back after an inspection?
- If you terminate properly within the inspection deadline using the contract forms and notice methods, the escrow holder usually returns the deposit per the contract.
What if the appraisal comes in low on my Colorado Springs home?
- If the parties cannot resolve a low appraisal, you can often terminate within the appraisal period and preserve your deposit by giving proper written notice.
Can a seller keep my earnest money if I simply change my mind?
- If the reason is not covered by a contingency and you miss notice deadlines, the seller may claim the deposit as liquidated damages if that remedy is selected in the contract.
What happens to my deposit if my loan is denied late in escrow?
- If you have a financing contingency and you give proper notice within the deadline, you can usually keep your deposit. Missing the deadline can put your funds at risk.
Is earnest money refundable on new construction in El Paso County?
- Builder contracts often differ. Some deposits can be subject to separate schedules and fees, so review timelines and refund terms before you sign.
