Ever been told you need to put down “earnest money” with your offer and wondered what that actually means? You are not alone. When you buy or sell in Baltimore City, this small deposit carries big weight for how your deal moves forward. By the end of this guide, you will know what earnest money is, how it works in Maryland, typical amounts in Baltimore, and how to protect it through your contract. Let’s dive in.
Earnest Money, in Plain English
Earnest money, also called an earnest money deposit or EMD, is a good‑faith deposit you include with an offer to show the seller you are serious. It gives the seller confidence to take the home off the market while you work through inspections, financing, title review, and other steps.
If the sale closes, your earnest money is usually credited toward what you owe at settlement. That can be part of your down payment, closing costs, or both. Until then, it is held in a separate escrow or trust account. It is not the same as your down payment until it is applied at closing.
How Earnest Money Works in Maryland
In Maryland, the purchase contract controls the deposit details. You and the seller agree on where the money is held, how quickly it must be deposited, and the conditions for release.
Who Holds the Deposit
Your funds are typically held by a neutral third party. That is often a title company, an attorney handling the closing, or a broker’s licensed trust account named in the contract. The holder is called the escrow agent, and their name and contact details should be written into your agreement.
When and How You Deposit
Most contracts require you to deposit the earnest money within a short window after both parties sign, often within a few business days. The exact timing is negotiable and should be spelled out in your contract. Buyers usually pay by personal check, cashier’s check, wire transfer, or a secure escrow transfer.
Ask for a written receipt showing the amount, the date deposited, and the escrow agent’s contact information. Keep that with your contract documents.
When Funds Are Released
The escrow agent holds the funds until one of three things happens: you close, both parties sign a written release, or a dispute is resolved through the contract’s dispute process. If any instructions are unclear or contested, the escrow agent typically holds the money until everyone agrees in writing or a court or arbitration process directs the release.
How Much in Baltimore City?
There is no fixed amount, but common practice ranges from about 1% to 3% of the purchase price. On lower‑priced homes, buyers sometimes offer a flat amount like $1,000 to $5,000. In competitive situations, you may see higher deposits, sometimes 2% to 5% or more, to help an offer stand out.
Baltimore City’s market varies block to block. Rowhouse age and condition, neighborhood demand, and price point can all influence how much you are comfortable putting down. Older homes can bring repair questions or title issues, which some buyers factor into their risk tolerance. A local agent can help you balance competitiveness and protection based on current neighborhood norms.
Contingencies That Protect You
Contingencies are the safety valves that can allow you to cancel and get your earnest money back if certain conditions are not met. The key is to follow the contract steps and deadlines in writing.
Inspection Contingency
An inspection contingency lets you inspect the home and either negotiate repairs or cancel if you cannot reach agreement within the set timeline. If you cancel as the contingency allows, you can usually recover your earnest money. Missing the deadline often weakens your protection.
Financing Contingency
If you cannot obtain financing as described in your contract and you follow the notice and timing rules, you can typically cancel and keep your deposit. This requires documentation from your lender and written notice within the contract window.
Appraisal Contingency
If the appraisal comes in below the contract price and you cannot renegotiate or bring extra funds, you may have the right to cancel and receive your earnest money back. Again, timing and written notices matter.
Title Contingency
If title research reveals defects that the seller cannot resolve within the contract period, you may cancel and recover your deposit. If defects are cured and you still decide to walk away, your refund rights may change.
Deadlines are Everything
Put every contingency date on your calendar. Inspection response dates, financing approval dates, and appraisal deadlines can determine whether you keep or lose your earnest money. Late actions often shift risk to the buyer.
When Sellers may Keep it
Sellers may have the right to keep your earnest money if you default after your protections expire or if you do not follow the contract.
- If you remove contingencies and then walk away for buyer’s remorse, the contract may allow the seller to keep the deposit as liquidated damages.
- If you miss the deposit deadline or other key performance dates and do not cure within the contract terms, you may be in default.
Contracts differ on remedies, so read yours closely and ask questions before you sign.
Buyer Checklist: Baltimore City
Use this quick plan to protect your deposit.
- Choose an amount that strengthens your offer without exceeding your risk comfort. Higher EMDs can stand out, but they raise your exposure if you default.
- Make sure your contract clearly names the escrow agent and the deposit deadline. Get written instructions before sending funds.
- Verify any wiring instructions directly with the escrow agent or your attorney by phone using a known number. This helps you avoid wire fraud.
- Track every contingency deadline in writing. Send notices through the methods the contract requires.
- Keep copies of your executed contract, deposit receipt, escrow agreement, inspection reports, lender letters, appraisal report, and any release forms.
- If you need help with funds, look into Baltimore City and non‑profit assistance programs and confirm whether their rules allow money to be used as an earnest deposit.
Seller Checklist: Baltimore City
Protect your timeline and reduce risk by setting clear expectations from the start.
- Require the deposit within a short, specific timeframe after acceptance. State what happens if it is late.
- Specify a reputable title company or attorney to hold funds, and confirm their written escrow procedures.
- Consider a larger earnest deposit as a sign of commitment, but remember that state law and your contract determine remedies if a buyer later defaults.
- Request proof of deposit on time, and keep all receipts and communications.
Documents to Save
Keep a clean paper trail from offer to closing. At minimum, save:
- Executed contract and addenda
- Earnest money receipt and escrow agreement
- Inspection responses and repair addenda
- Financing letters, appraisal reports, and title reports
- Any mutual releases or notices related to deposit or termination
If A Dispute Happens
Many contracts require a mutual written release to disburse earnest money when a deal does not close. If the parties disagree, the escrow agent will usually hold funds until you reach an agreement, a court order is issued, or arbitration resolves it. During that time, keep communication in writing and follow the dispute steps in your contract. If you need help, consider consulting a Maryland real estate attorney or your escrow agent for next steps.
Baltimore Watchouts
Baltimore’s housing stock includes many pre‑1978 homes. Federal lead‑based paint disclosure rules apply to those properties, and inspection findings or required addenda can affect your timeline. Factor that into your contingency planning.
Rowhouse renovations and older building systems can introduce surprises. Give yourself enough inspection time and consider specialists if needed. The right timeline helps you protect your deposit while you assess the property.
Wire fraud is a real risk in any market. Always confirm wiring instructions with your escrow agent or attorney by calling a number you already trust. Never rely only on email instructions.
Real‑world Examples
- Inspection exit done right: You discover major roof issues. You deliver written notice to terminate within the inspection period. The escrow agent receives your notice and the required release, and your earnest money is refunded.
- Appraisal shortfall: The home appraises below the price. You cannot renegotiate and choose to cancel under the appraisal contingency, following the notice rules on time. Your deposit is returned.
- Missed deadline default: You waived inspection and missed your financing deadline. You later decide to back out without a valid contingency. The seller may have the right to keep your earnest money as liquidated damages.
The Bottom Line
Earnest money shows commitment and keeps your deal on track, but it comes with rules. When you know who holds the funds, how deadlines work, and which contingencies protect you, you can craft a confident offer in Baltimore City. If you want a local read on typical deposit ranges by neighborhood and a contract strategy that fits your goals, connect with a trusted guide.
Ready to move forward with clarity? Reach out to David Pridgen for local advice and a step‑by‑step plan that protects your deposit and strengthens your offer.
FAQs
Is Earnest Money Refundable in Baltimore City?
- Yes, if you cancel within the contract’s allowed contingencies and follow the notice and timing rules. If you default after protections expire, the seller may keep it per the contract.
Who Holds Earnest Money in Maryland Real Estate Deals?
- A neutral third party usually holds it, such as a title company, a closing attorney, or a broker’s licensed trust account named in your contract.
How Much Earnest Money Should I Offer in Baltimore?
- Many buyers offer about 1% to 3% of the price or a flat amount like $1,000 to $5,000. In competitive areas, higher deposits may help your offer stand out.
Can Earnest Money Go Toward My Down Payment or Closing Costs?
- Yes. If the sale closes, your deposit is typically credited to the funds you owe at settlement, such as your down payment and closing costs.
What Happens to My Deposit If the Appraisal Is Low?
- If you have an appraisal contingency and follow the contract steps on time, you can usually cancel and receive a refund. Without that contingency, your options may be limited.
How Long Does the Escrow Agent Hold My Earnest Money?
- Until closing, a mutual written release, or a dispute resolution outcome such as a court order or arbitration, depending on your contract.
