Earnest Money in Maryland Explained

Buying in Ellicott City and unsure how much earnest money to put down? The amount you choose can strengthen your offer, but it also puts real money at risk if the deal falls apart. You want to be competitive without exposing yourself to avoidable loss. In this guide, you’ll learn what earnest money is, typical deposit ranges seen in Howard County, how contingencies affect refunds, and practical steps to size and protect your funds under common Maryland contract practice. Let’s dive in.

Earnest money basics

Earnest money is your good‑faith deposit submitted when you sign a purchase contract. It shows the seller you are serious and gives some protection if a buyer defaults. If you close, the deposit is applied to your down payment or closing costs. If you do not close, what happens to the money depends on the contract and whether you followed the rules and timelines.

Who holds your deposit

In Maryland, earnest money is usually held in a trust or escrow account by a listing broker, an attorney, or a title and settlement company. In Howard County, many transactions use a title company or settlement attorney to hold funds. Always confirm who will hold the deposit and get a written receipt showing the date, amount, and escrow holder.

Typical amounts in Ellicott City

Across many markets, deposits often fall around 1% to 3% of the price. Locally, Ellicott City is a strong suburban market, so deposits often land in the middle to upper end of that range on competitive listings.

• Common local guidance for mid‑market homes: 1% to 2%
• Competitive or multiple‑offer situations: 2% to 5% or more
• Modestly competitive listings: often $2,500 to $7,500 for typical single‑family homes

Example math:

• $400,000 home: 1% is $4,000; 2% is $8,000
• $600,000 home: 1% is $6,000; 2% is $12,000

Your exact deposit should reflect the price point, current competition, your risk tolerance, and your lender’s documentation requirements.

Contingencies and refunds

Whether you get your deposit back depends on the contract and deadlines. Under standard Maryland forms, you can usually terminate within specific periods tied to contingencies and receive a refund if you follow the notice rules in writing.

• Inspection contingency: You may approve, negotiate, or terminate within the inspection window. If you terminate on time, the deposit is typically refundable.
• Financing contingency: If a timely loan denial occurs and you give proper notice, the deposit is usually refundable. Missing deadlines or failing to apply in good faith can put your deposit at risk.
• Appraisal contingency: If the appraisal comes in low and you have this protection, you may renegotiate or terminate within the deadline and get a refund.
• Title contingency: Unresolved title defects before closing generally allow termination with a refund if the contract provides that right.
• Sale‑of‑home contingency: If permitted in the contract and you cannot sell your home within the set period, you can usually terminate and receive a refund.

Deadlines are strict. Keep everything in writing and track dates closely to preserve your rights.

When you could lose it

A seller may be entitled to keep the deposit if a buyer defaults without a contractual right to terminate. Common pitfalls include missing contingency deadlines, waiving protections and later backing out for that reason, or refusing to close without a contract‑permitted cause. Many Maryland contracts allow sellers to retain the deposit as liquidated damages if specified, though disputes can still require resolution.

How to size your deposit

Consider these factors before you submit an offer:

• Market heat: Strong competition often calls for a higher deposit to stand out.
• Price point: Use percentage benchmarks as a starting point, then convert to dollars.
• Risk tolerance: A larger deposit signals strength but increases your exposure if you default.
• Financing: Lenders require documentation of deposit funds; very large deposits may need extra proof.
• Seller expectations: Some listings have norms for deposit size and timing. Ask your agent for current local patterns.

Protect your deposit

Follow these steps to reduce risk while staying competitive:

1. Keep key contingencies that matter to you, and follow all notice procedures and deadlines in writing.
2. Use a neutral escrow holder, such as a title company or settlement attorney, and obtain a written receipt.
3. Confirm escrow instructions in the contract, including who holds funds and when they are delivered.
4. Avoid waiving protections unless you understand and accept the risk.
5. Get written confirmations for any agreed changes related to the deposit.
6. Consider split deposits: a smaller initial amount with a larger top‑up once the contract is fully accepted.
7. If you need a sale‑of‑home or specific financing structure, set clear timelines in the contract.

Key contract clauses

When reviewing or drafting your offer, focus on:

• Deposit delivery: who holds it and the deadline for delivery
• Release and refund terms: exact conditions and notice procedures
• Remedies: whether the seller can keep the deposit as liquidated damages
• Contingency timelines: whether days are calendar or business days
• Escrow disbursement: whether mutual written consent is needed for release
• Required addenda: inspection, financing, appraisal, title, HOA, and related disclosures

When to involve an attorney

If you are unsure about the form language, the size of your deposit, or a potential dispute, consult a Maryland real estate attorney. Maryland closings often involve attorneys and title companies, and a quick review can help you avoid costly missteps.

Quick buyer checklist

• Ask your agent for recent Ellicott City examples of winning deposit amounts
• Choose a deposit aligned with your risk tolerance and financing
• Confirm the escrow holder and get a receipt upon delivery
• Calendar all contingency deadlines and plan inspections and loan application timing
• Keep written records of every notice and delivery confirmation

Work with a local advisor

A well‑sized, well‑protected deposit can help you win the home while keeping your risk in check. If you want a clear strategy tailored to an Ellicott City property, our broker‑led team can help you weigh competitiveness against protection, draft clean terms, and track every deadline to the finish line. Ready to move forward with confidence? Connect with Equity One Realty.

FAQs

What is earnest money in a Maryland home purchase?

• It is a good‑faith deposit you make when signing a contract. If you close, it applies to your purchase; if you do not, its release depends on your contract and whether you met contingency deadlines.

How much earnest money is typical in Ellicott City?

• Many offers land around 1% to 2% of the price, with 2% to 5% in competitive situations and about $2,500 to $7,500 for modestly competitive listings, depending on price and market heat.

If the appraisal is low, do I lose my deposit in Maryland?

• Not if you have an appraisal or financing contingency and you act within the deadline. You can try to renegotiate or terminate on time and typically receive a refund.

Who should hold my earnest money in Maryland?

• A neutral title company or settlement attorney commonly holds funds in escrow, though a broker or attorney can also hold them. Always verify the holder and get a written receipt.

What if a seller refuses to release my earnest money after I cancel properly?

• Send a written demand, involve your agent and the escrow holder, and consult a Maryland real estate attorney if needed. Some contracts require mutual consent or a court order to disburse funds.

Is earnest money the same as an option fee or binder in other states?

• No. In Maryland, earnest money is part of the purchase funds and is usually credited at closing, while option fees or binders used elsewhere work differently.