Earnest money is typically paid within 1 to 3 business days after offer acceptance. Due to the “Time is of the essence” clause, deposit deadlines are binding. Funds should always be disbursed to a neutral third party (escrow, title, attorney). After the deadline, the seller may cancel the contract.
After your offer is accepted, the first real financial investment in the home buying process is often the earnest money deposit.
“The earnest money deposit is the honest deposit a seller pays immediately after accepting an offer on a home,” explains Courtney King, senior manager of designated brokers at Redfin. “This really demonstrates your intent to purchase the home and shows the seller that you are fully committed to the purchase. It also acts as a safeguard in case you breach the contract. That way, the seller may have a chance to keep that earnest money deposit.”
The earnest money deposit is different from the down payment and other closing costs and is typically expected to be paid within 1 to 3 business days after the seller signs the purchase contract.
The most effective way to show the seller how serious you are is to sign the contract with a deposit. However, for real estate transactions, the process takes a little longer.
In this article:
When do I pay the deposit?
How is the deposit paid and who receives it?
What happens if the deposit is not paid by the due date?
Tips for meeting the deposit payment deadline
FAQ
At what point do I pay the deposit?
The earnest money is paid immediately after the offer is accepted. Standard payment terms are 1-3 business days. Although the exact deadline is specified in the contract, it is important to clarify the terms, such as whether the number of days refers to business days or calendar days. Is there a deadline for payment on the last day?
Generally, the deposit payment period is as follows:
Offer accepted (day 0): Contract clock starts. Deposit payment deadline (1-3 business days): The buyer hands over the deposit to a neutral third party, ideally an escrow agent. Escrow Deposit Verification (1-2 business days): Funds are verified and inspection and contingency period begins.
The wording of the contract is important. If the purchase contract states “within 3 business days of receipt,” weekends and holidays generally do not count. However, be sure to double-check how your state or brokerage defines business days. Once the payment is confirmed, we will officially proceed with the transaction review, appraisal, and financing.
In some areas, such as North Carolina, South Carolina, and Texas, you will pay a non-refundable due diligence fee or optional fee instead of or in addition to your earnest money deposit. Be sure to check with your agent to understand the regulations in your area.
How is the deposit paid and who receives it?
In addition to the deadline for paying the earnest money, the contract will also specify where the earnest money should be sent and how it will be paid. In most cases, the deposit is turned over to a neutral third party, such as a title company, escrow agent or attorney, and King says this is the most effective way to protect your earnest money because there is essentially no conflict of interest.
How to pay the deposit
Wire transfer is the most common and safest method of depositing funds into an escrow account, where your funds remain safe until closing. Cashier’s or certified checks may be accepted if delivered directly to the third party fund holder.
Do not pay the deposit directly to the seller. This protects both parties from fraud, incorrect payments, and legal disputes in case a refund is required.
Always check payment instructions directly with your agent or escrow representative before transferring funds. Wire fraud targeting real estate transactions is a big risk, so double-check details by calling using a verified number or meeting in person before sending money.
Who will receive the deposit?
The escrow holder (listed in the contract) is responsible for managing the earnest money. They confirm that they received the funds, submit the appropriate documentation, and hold the funds until one of two things happens.
Your home is completed: Your earnest money is applied toward your down payment or closing costs. Contract ends: Money is released according to the terms of the purchase contract. Typically, if the buyer cancels due to unforeseen circumstances, the money will be refunded to the buyer, and if the terms of the contract are violated, the seller will keep it.
What happens if the deposit is not paid by the due date?
Most real estate contracts include a “time is of the essence” clause, which means a deadline is binding.
“Once you sign, you are obligated to fulfill your obligations as a buyer,” King says. “It’s important to make sure you meet deadlines.” And you need to be clear on what these deadlines are, because a few things can happen if you miss the deadline for paying your earnest money.
Most importantly, the seller can cancel the contract. In most transactions, the contract does not fully take effect until the earnest money is paid. If the deadline is missed, the seller can move on to the next buyer without penalty. You may lose credibility as a buyer. Even if the seller does not cancel the contract, failure to meet payment deadlines may make the buyer appear unreliable, putting unnecessary strain on the transaction and potentially affecting subsequent negotiations. Buying a home may be delayed. Without the earnest money deposit, we cannot officially begin the escrow process. As a result, inspections, assessments, or other deadlines associated with the start date may be delayed.
Conclusion: Don’t miss the deposit payment deadline
Missing a deposit payment deadline, even by accident, can have serious consequences. To get your home buying journey off the ground, start with the following:
Prepare funds early. Before making an offer, make sure the earnest money is available (not tied up in an investment account or tied up in savings that are slow to transfer). Check the exact due date before signing. Ask your agent to point out the deposit clause in your contract. It will clarify the number of days and whether they are business days or calendar days. Plan around weekends and holidays. If the deadline is on a Friday or before a holiday, start sending the money early so the escrow holder can receive it in time. Know who to pay. An escrow or title company is the safest place to transfer your funds. Never send money until you receive direct instructions from your agent or escrow representative. Obtain written confirmation. Be sure to request proof that your earnest money deposit was received and deposited. This protects you in case any questions arise later and also acts as a confirmation to continue the due diligence process.
By meeting deadlines and reviewing details, your earnest money deposit will serve its intended purpose and get you one step closer to owning your new home.
Frequently Asked Questions: When do I have to pay the deposit?
Can I make a deposit at the same time as I submit an offer?
Usually, the deposit is paid after acceptance of the offer. Never transfer funds until you have a signed contract and payment instructions from the escrow holder. In competitive markets, some buyers will put down money immediately upon acceptance or provide proof of funds upfront to strengthen their offer.
What happens if the deposit deadline falls on a Saturday, Sunday, or holiday?
Most contracts use business days, so weekends and holidays don’t count toward deadlines. For example, if your contract says “within 3 business days” and your offer is accepted on Thursday, your earnest money will be due by Tuesday (assuming there are no holidays in between). Be sure to check your contract. The contract defines how “days” are counted in a transaction.
Is the deposit paid before the inspection or after the inspection?
The deposit is usually paid before the inspection period begins. Once the deposit is received, the inspection and emergency schedule will officially begin. When you put your money down seriously, it tends to “activate” the rest of the home buying process: first deposit, then inspection, appraisal, and closing.
