Earnest Money Explained for Monument Homebuyers

Buying in Monument and feeling unsure about earnest money? You are not alone. This small line in your offer carries real weight, from how strong your bid looks to how protected your deposit is if plans change. In this guide, you will learn what earnest money is, how it works in Colorado, what amount makes sense in Monument, and how to keep your funds safe. Let’s dive in.

Earnest money basics

Earnest money is a good-faith deposit you provide after a seller accepts your offer. It shows you are serious about buying and is held in a neutral escrow or trust account. If you close, those funds are credited toward your down payment and closing costs. If the deal ends under a contract contingency, your deposit is typically refunded per the contract.

How it works in Monument, CO

Deposit timing and who holds it

Your contract sets the delivery deadline for earnest money. In Colorado, it is commonly due within 24 to 72 hours after mutual acceptance, but the exact timing is whatever you and the seller agree to in writing. Funds are usually held by a title or escrow company, a closing agent, or the brokerage named in the contract.

Payment forms you can use

Most buyers use a personal check, certified or cashier’s check, or a wire transfer to the named escrow holder. Some title companies accept electronic transfers. Always confirm instructions in writing and verify them by a known phone number to avoid wire fraud.

What happens at closing

At closing, your earnest money is applied to your funds to close. If the sale is properly terminated under a contingency, the title or escrow company releases funds per the contract’s escrow instructions.

How much should you put down?

There is no one-size amount. In Colorado and nationally, typical ranges are either a flat amount, often 1,000 to 5,000 dollars for lower-priced homes, or a percentage of the price, often 1 to 3 percent. In Monument, local competitiveness can push deposits higher when multiple offers are likely.

Factors that influence your amount:

• Local market conditions and how many offers the seller expects
• Purchase price and property type, including new construction or land
• Your contingency terms and deadlines
• Your comfort level with funds at risk if you default

Contingencies that protect your deposit

Your protections come from the contract’s contingency clauses and deadlines. Common ones include:

• Inspection contingency: Cancel within the inspection period if the contract allows and keep your deposit.
• Financing contingency: If you cannot secure a loan by the agreed date, you may be protected.
• Appraisal contingency: If the home does not appraise at or above the price and you have not waived this, you can typically renegotiate or terminate per the contract.
• Title contingency: Back out if unacceptable title defects are not resolved.
• HOA document review: Cancel if the documents reveal issues you cannot accept.

Deadlines and refunds

In Colorado contracts, deadlines matter. You must act, object, or terminate by the stated dates to preserve your protections. If you terminate properly within a contingency period, your earnest money is usually refunded according to the escrow instructions. Miss deadlines and you could lose these protections and risk your deposit.

If a deal falls apart

If a buyer breaches the contract without a protective contingency, the seller may be entitled to keep the earnest money, depending on the contract. Many Colorado contracts include a liquidated damages option that can limit the seller’s remedy to the earnest deposit, but terms are negotiable. If there is a dispute over who gets the funds, the title or escrow company will often hold the money until both parties sign a release or a legal resolution is reached through mediation, arbitration, or court.

New construction and land

Builder contracts often handle deposits differently and may label some funds as non-refundable outside limited circumstances. Lot reservations and land purchases may use different amounts and rules. Read builder and land contracts closely and ask questions before signing.

Step-by-step checklist for Monument buyers

• Before your offer
  • Ask your local agent about current earnest money norms in Monument and the Pikes Peak area.
  • Decide how much you can comfortably put at risk if the deal does not close.
• When you write the offer
  • Specify the earnest money amount, escrow holder, and delivery deadline.
  • Confirm accepted payment methods and get wiring instructions directly from the escrow holder.
  • Set clear contingency periods with calendar reminders for each deadline.
• After mutual acceptance
  • Deliver funds on time and get a written receipt from the escrow or title company.
  • Keep copies of checks, wire confirmations, and escrow receipts.
  • Track deadlines and communicate in writing to preserve rights to a refund if needed.
• At closing
  • Expect your earnest money to be credited toward your cash to close.

Wire safety tips

Wire fraud is a real risk. Protect yourself by following these steps:

• Call the title company using a verified phone number before sending any funds.
• Do not rely on last-minute email changes to wiring instructions.
• Send a small test transfer only if the escrow holder recommends it and confirms receipt.
• Re-confirm routing and account numbers before initiating the full wire.

Smart strategies in competitive markets

If you cannot offer a large deposit, you still have options. You might use a slightly lower earnest amount and strengthen other terms, such as a shorter inspection period, flexible closing timing, or strong pre-approval. Discuss tradeoffs with your agent so your offer stays competitive while your deposit stays protected by clear contingencies and realistic deadlines.

Compliance and oversight in Colorado

Licensed professionals in Colorado must handle client funds properly, including timely deposits into trust accounts and careful recordkeeping. Title and escrow companies act as neutral holders and follow the contract’s escrow instructions. If questions or disputes arise, consult your signed contract and consider speaking with a Colorado-licensed real estate attorney for guidance.

Work with a local guide

Earnest money can be simple when you know the rules and deadlines. You deserve a Monument-based team that explains your options, watches the calendar, and negotiates with confidence so your deposit and your goals stay protected. If you are planning a move in Monument or the northern Colorado Springs suburbs, reach out to The Fletcher Team & Associates for clear, local guidance and next steps. The Fletcher Team & Associates is here to help.

FAQs

What is earnest money and how is it used?

• It is a good-faith deposit held in escrow and typically credited toward your down payment and closing costs at closing.

How soon do I need to deliver earnest money in Colorado?

• Your contract sets the deadline, commonly 24 to 72 hours after acceptance, and you should follow it exactly.

Can I get my earnest money back after inspection in Monument?

• If you cancel properly within the inspection contingency period as allowed by your contract, it is typically refundable.

Who decides what happens to disputed earnest money?

• The escrow instructions usually require a mutual written release, or the funds are held until resolution by mediation, arbitration, or court.

Is earnest money the same as an option or inspection fee?

• No, earnest money is a deposit toward purchase, while option or inspection fees, if used, can be separate and sometimes non-refundable.

What if the appraisal comes in low?

• If you have an appraisal contingency and the home appraises below the price, you may renegotiate or terminate under the contract.

How do builder contracts handle earnest money?

• Builder contracts often use different deposit rules and may be non-refundable outside limited conditions, so review those terms carefully.