Writing an offer on a Faribault home and wondering how much earnest money you should put down? You are not alone. This small but important deposit can shape how strong your offer looks and how protected your money is if plans change. In this guide, you will learn what earnest money is, how much buyers in Faribault typically offer, when it is refundable, and how escrow works in Minnesota. Let’s dive in.
What earnest money is
Earnest money is a good-faith deposit you include with a signed purchase agreement to show you are serious about buying the home. It becomes part of your total funds due at closing. If you close, it is applied to your down payment or closing costs.
Sellers view earnest money as a sign you are committed. It also gives both sides a clear framework for timelines and contingencies in the contract. The deposit itself does not create extra legal rights. What happens to it depends on the terms of the purchase agreement and the deadlines you meet.
Typical amounts in Faribault and Rice County
There is no one-size amount in Rice County. In many Minnesota transactions, buyers offer a flat amount between $1,000 and $5,000 or roughly 1 to 3 percent of the purchase price. In lower-competition settings, smaller flat deposits like $500 to $1,000 can be common. In multiple-offer situations, some buyers raise the deposit to stand out.
Faribault is a smaller market than the core Twin Cities suburbs. Competition and inventory shift by season and price point. The right number for you depends on the property, your financing, and how many other buyers are in the mix.
Quick local examples
- For a $200,000 home: 1 percent equals $2,000. A common range could be $1,000 to $5,000 depending on how competitive it is.
- For a $350,000 home: 1 percent equals $3,500. In a hot moment, a buyer might offer $5,000 to $10,000.
- For a lower-priced condo or a distressed property with low competition: $500 to $1,500 may be acceptable.
Tip: A deposit that is meaningful to the seller but comfortable for your cash flow is the goal. Ask your agent what is typical for your price band and neighborhood this month.
When your deposit is refundable
Your ability to get earnest money back depends on the contingencies in your purchase agreement and whether you follow the timelines. Common buyer protections include:
- Inspection contingency: You can cancel within the inspection window if you are not satisfied with the results and receive your deposit back per the contract.
- Financing contingency: If you apply in good faith and your lender denies the loan before the deadline, the deposit is usually refunded.
- Appraisal contingency: If the appraisal comes in below the purchase price, you can cancel or renegotiate per the contract terms.
- Title contingency: Unresolved title defects can allow you to cancel and recover your deposit.
- Sale-of-home contingency: If you must sell your current home first and cannot do so within the agreed period, you can cancel under the contingency terms.
The purchase agreement sets firm dates for each contingency. If you cancel before the deadline and follow the required steps, your deposit is typically refundable. Once you remove contingencies in writing, or if deadlines pass without action, your ability to reclaim the deposit becomes limited.
Deadlines that matter
- Inspection period end date: Complete your inspection and decide on repairs or cancellation before the deadline.
- Financing approval date: Submit a full loan application quickly and track the lender’s milestones.
- Appraisal timing: Monitor the appraisal schedule so you have time to respond to any gap.
- Written notices: Use the contract forms and send cancellations or extensions in writing.
Good documentation and on-time decisions are essential to protect your deposit.
How escrow works in Minnesota
Who holds the money? Your purchase agreement will name the escrow holder. In Minnesota, earnest money is commonly deposited with the listing broker’s trust account, a title or settlement company, or an attorney identified in the contract.
You should receive a written receipt and confirmation of the escrow account after you deliver the deposit. Brokers and settlement companies follow trust-account rules and keep detailed records. The deposit sits in that account until closing or cancellation per the contract.
If you wire funds, confirm wiring instructions directly with the title company or escrow holder using a verified phone number. Avoid sending money to any account you cannot verify.
If a dispute happens
If the buyer and seller do not agree on who should get the deposit, the escrow agent will hold the funds until the dispute is resolved. Resolution usually requires one of the following: a mutual written agreement signed by both parties, a contract-required mediation or arbitration process, or a court order. Minnesota purchase agreement forms often outline how escrow disputes are handled, so read those terms closely.
If a buyer defaults without a contract-allowed reason, many contracts let the seller keep the deposit as liquidated damages or pursue other remedies as stated in the agreement.
Real-world scenarios
Scenario A, buyer protected by inspection: You offer $275,000 with a $3,000 deposit and a 10-day inspection contingency. The inspection reveals major issues. You cancel in writing within 10 days using the proper form. The escrow agent returns your deposit per the contract.
Scenario B, contingencies removed: To win a multiple-offer situation, you remove inspection and financing contingencies in writing. Later you change your mind and cancel. Because you removed protections, the seller will likely keep the deposit unless you both agree otherwise.
Scenario C, financing falls through: You include a financing contingency and apply for your loan right away. Underwriting denies the loan. You cancel before the financing deadline. Your deposit is returned. If you had not applied or had misrepresented your finances, the seller could challenge your refund.
Buyer checklist: protect your deposit
Use this quick checklist to stay organized from offer to closing:
Before you write the offer
- Decide on a deposit amount that fits your budget and the property’s competition level.
- Confirm who will hold escrow funds and how you will pay (check or wire).
Right after acceptance
- Deliver the deposit by the deadline in the contract.
- Get a written receipt and escrow confirmation.
During contingencies
- Schedule the home inspection promptly and review results early.
- Apply for your loan in full and respond quickly to lender requests.
- Track appraisal and title timelines so you can act before deadlines.
If you need to cancel
- Send written notice with the correct form before the contingency deadline.
- Confirm that the escrow agent received all required signatures for disbursement.
Before closing
- Verify that the deposit will be applied to your funds due at closing.
- Bring updated closing disclosures that show the credit for your earnest money.
Key tips to keep in mind
- Keep contingencies until you are confident. Only remove protections after careful review and advice from your agent.
- Meet every deadline. Calendar reminders help you avoid unforced errors.
- Act in good faith with your lender. A timely, complete loan application supports your financing contingency.
- Confirm escrow details. Always verify wiring instructions by phone with the title company or escrow holder.
- Document everything. Save receipts, emails, and signed forms so there is a clear record.
Local insight for Faribault buyers
In Faribault and the wider Rice County area, deposit norms can flex with the season and price tier. Starter homes can see brisk interest and higher deposits during peak times. Acreage properties or homes needing updates may have more negotiating room and lower deposit expectations.
A practical range for many single-family homes is a flat amount of $1,000 to $5,000 or about 1 to 3 percent of the price. In a true multiple-offer scenario, you might raise the deposit to strengthen your offer, but make sure your contingency timelines still protect you. Your best move is to pair a competitive deposit with strong terms and disciplined follow-through.
The bottom line
Earnest money is a simple idea with important details. The amount you offer can help your deal stand out, and the contract terms determine when you can get your deposit back. When in doubt, lean on three golden rules: get a receipt, know your contingencies and deadlines, and confirm the escrow holder in the contract.
If you want local guidance tailored to your price range and the current Faribault market, reach out to the team that handles details from first showing to closing. Schedule a quick consult with Marissa Babcock to put a smart plan in place for your next offer.
FAQs
What is earnest money in a home purchase?
- It is a good-faith deposit you pay when your offer is accepted, and it is applied to your down payment or closing costs at closing if the sale goes through.
How much should Faribault first-time buyers budget?
- Plan for a range of $1,000 to about 1 to 3 percent of the purchase price, with higher deposits possible in multiple-offer situations.
When do I pay earnest money in Minnesota?
- Your purchase agreement sets the deadline, often within a few days of acceptance, and the funds go to the named escrow holder.
How fast do I get earnest money back after an inspection cancellation?
- After the escrow holder receives the signed cancellation paperwork, disbursement typically occurs within days to a few weeks, depending on documentation and processing.
Who holds earnest money in Rice County deals?
- Commonly the listing broker’s trust account, a title or settlement company, or an attorney specified in the purchase agreement.
Can a seller keep my deposit if I back out without a valid reason?
- If you cancel after removing contingencies or miss deadlines without an allowed reason, the seller may keep the deposit per the contract.
How do I avoid wire fraud when sending my deposit?
- Call the title company or escrow holder at a verified number to confirm wiring instructions, and never send funds to an unverified account.
