How Earnest Money Works in Denver

If you are buying a home in Denver, you will likely be asked to send earnest money within a few days of going under contract. It can feel like a lot to wire before inspections or loan approval are complete. The good news is there are clear rules in Colorado that explain how deposits work, when they are refundable, and how to protect your money. In this guide, you will learn typical deposit amounts, how funds are held and applied, which contingencies matter most, and practical steps to keep your deposit safe. Let’s dive in.

What earnest money is

Earnest money is a refundable deposit that shows you are serious about buying a home. It becomes part of your funds at closing and is credited to your purchase price or closing costs if the deal completes. It also gives the seller limited protection if a buyer breaches the contract, depending on the contract terms.

The amount, where the money is held, and when it is due are all written into your offer using Colorado’s standard residential contract. You and the seller agree on the deposit terms when the offer is signed.

How it works in Denver

Where funds are held

In Denver, earnest money is usually held by a neutral escrow agent. That is typically the title company that will handle your closing. Less often, the listing broker’s trust account holds the funds. The contract names the escrow holder and states how and when you will deliver the deposit.

Delivery timing

The contract sets the deadline for delivery. Local custom often ranges from 1 to 3 business days after contract acceptance, but it is negotiable. Make sure the exact deadline appears in the contract so you know when to send funds.

What happens at closing

If you close, the title company applies your earnest money to your down payment and closing costs. If the contract is terminated under one of your valid rights, the escrow holder returns your funds per the written instructions.

If there is a dispute

Escrow holders usually need written instructions signed by both parties to release money. If you and the seller do not agree, the funds often stay in escrow until there is a mutual release, mediation or arbitration, or a court order. Escrow holders can also file an interpleader so a court decides who receives the deposit.

Colorado contract protections

Key contingencies that protect refunds

The Colorado residential contract includes several contingencies that can protect your deposit when used correctly:

• Inspection and due diligence. You have a set window to inspect the property and request repairs or terminate. If you terminate properly within that window, your earnest money is typically refunded.
• Financing. If your loan cannot be approved under the contract’s terms and you give proper notice by the deadline, you usually receive your deposit back.
• Appraisal. If the lender’s appraisal comes in below the contract price, you may have the right to terminate and keep your deposit, depending on the appraisal clause and timelines in your contract.
• Title and HOA review. You can object to title issues or HOA documents within specified deadlines. If the issues are not resolved and you terminate on time, your deposit is generally returned.

Deadlines and notices matter

Colorado contracts rely on clear deadlines. You must give written notice within the time windows to keep your rights. Missing a deadline can put your deposit at risk. Know your dates for inspection, appraisal, loan approval, title, and HOA review before you send funds.

Seller remedies and liquidated damages

If a buyer defaults without a valid termination right, the seller may be allowed to keep the earnest money as liquidated damages, or the seller may have other remedies. The contract language controls which remedies apply. If you face a high‑risk situation, review your contract’s remedies section with your agent, and consider legal counsel if needed.

Nonrefundable terms and waived contingencies

Some buyers increase their earnest money or waive contingencies to win in a competitive situation. If you label funds as nonrefundable or remove key protections, your deposit is more likely to be forfeited if you cannot close. Colorado forms require clear agreement for any nonrefundable term. Understand the tradeoffs before you commit.

Typical Denver deposit sizes

There is no legal standard for earnest money in Denver. It is negotiated based on price, competition, and risk. Here are common guidelines used by local agents:

• For many entry and mid‑tier homes, deposits often fall between 1,000 and 5,000 dollars, or about 1 percent of the purchase price.
• For higher‑priced homes, a range of 1 to 3 percent is common. In very competitive cases, buyers may offer 2 to 5 percent or more.
• Aggressive or cash‑equivalent offers sometimes include 5 to 10 percent to signal high certainty.

Examples:

• On a 400,000 dollar home, 1 percent is 4,000 dollars. You may also see 1,000 to 3,000 dollars, depending on terms.
• On a 700,000 dollar home, 1 percent is 7,000 dollars. To stand out, some buyers use 1 to 2 percent, or 7,000 to 14,000 dollars.

Market conditions shift. In hot months, larger deposits and shorter timelines can help you compete. In slower periods, smaller deposits and longer contingency windows are often acceptable. Ask your agent for current neighborhood norms.

How to choose your amount

Before you write an offer

• Ask your agent what deposits have won recent offers in your target neighborhood and price range.
• Check with your lender so the deposit is documented and acceptable for underwriting.
• Decide which contingencies you want to keep. Your deposit strategy should match your risk tolerance and the market.

Factors to weigh

• Competition and number of offers.
• Purchase price and your available cash.
• Whether you will keep standard protections like inspection, appraisal, and financing.
• Seller signals, such as days on market or recent price changes.

Contract details to verify

• Exact deposit amount and delivery deadline in the contract.
• The name and contact for the escrow holder, usually the title company.
• All contingency periods and how to deliver written notices if you need to terminate.
• The remedies section that explains what happens if a buyer defaults.

Handling funds safely

• Use a delivery method the escrow holder accepts, such as a wire transfer or a certified or treasurer’s check. Some accept a personal check. Avoid cash.
• Get a written receipt from the escrow or title company. Keep copies of wiring instructions and confirmations.
• Confirm wiring details directly with the title company using a known phone number before you send money to reduce wire‑fraud risk.

Extra protection ideas

• Keep stronger contingency periods if the market allows. Longer inspection or financing windows give you more time.
• Use a smaller initial deposit with a clearly defined second deposit after a milestone, such as inspection resolution. Put the amount and timing in the contract.
• For complex situations, consult a Colorado real estate attorney for custom language or escrow instructions.

Special situations

• New construction. Builders often require staged deposits and different refund rules. Read the builder’s contract carefully before you sign.
• Cash purchases. Larger deposits are common for leverage, but you can still keep contingencies if you want them.
• Short sales, foreclosures, and REOs. These can involve different approval steps and timelines, which may affect refundability.
• Lease‑to‑own or option contracts. Option money can be nonrefundable and may be applied differently. Check your specific agreement.
• Wire‑fraud risk. Always verify wiring instructions directly with the escrow or title company and confirm before sending funds.

Quick Denver buyer checklist

• Confirm your deposit amount and whether it is refundable under your contingencies.
• Know who holds the funds and how to contact them.
• Write down your delivery deadline and approved payment methods.
• Track all contingency deadlines and how to send written notices.
• Understand how the deposit will be applied at closing.
• Check if any part is labeled nonrefundable and why.
• Get a receipt and keep your wire confirmation.
• Verify with your lender that your earnest money is documented correctly.

Work with a local advisor

A clear deposit strategy can strengthen your offer without adding unnecessary risk. You deserve guidance that matches the Denver market and your comfort level. With 9 plus years of experience, 200 plus families served, and top 10 percent production across Denver‑Metro, Ken brings practical context on what wins offers and how to protect your funds. If you want a calm, step‑by‑step plan for earnest money and contract timelines, reach out to schedule a quick conversation.

Ready to get started? Schedule a free consultation with Ken Posen - Compass.

FAQs

What is earnest money in Denver and why is it used?

• It is a refundable deposit that shows you intend to complete the purchase and is credited to your price or closing costs at closing.

When is earnest money due in a Colorado contract?

• The contract sets the deadline, often 1 to 3 business days after acceptance, and you must deliver funds to the named escrow holder by that date.

Is earnest money refundable in Colorado?

• Yes, if you terminate properly under a contract contingency or right within the deadlines and provide required written notice.

How much earnest money is typical for a 500,000 dollar Denver home?

• A common guideline is about 1 percent, or roughly 5,000 dollars, adjusted for market competition and your contingency terms.

Who holds earnest money in Denver transactions?

• A neutral escrow holder, usually the title company that is closing the transaction, or less often a broker’s trust account.

What happens to my deposit if the appraisal comes in low?

• Your rights depend on the appraisal clause and deadlines. If you terminate properly under an appraisal contingency, the deposit is typically refunded.

Can I pay earnest money with a personal check?

• Many escrow holders accept wires or certified checks. Some accept personal checks, but you should confirm accepted methods in advance.

What if there is a dispute over my earnest money?

• Escrow holders usually require a mutual written release. If you cannot agree, the funds may stay in escrow until mediation, arbitration, court order, or interpleader.