Making an offer on a home in Traverse City? One number can quietly carry a lot of weight: your earnest money deposit. If you are buying in Grand Traverse County, this deposit can help your offer stand out, but it also comes with rules and timelines you will want to understand. In this guide, you will learn how earnest money works in Michigan, what amounts are common around Traverse City, how contingencies protect your funds, and how to avoid the most common mistakes. Let’s dive in.
What earnest money is
Earnest money is a good-faith deposit you submit with your offer. It shows the seller you are serious and gives the contract some security. If the sale closes, your deposit is applied to your down payment or closing costs.
It is not a fee to the seller. It is held in escrow and released according to the purchase agreement. Whether it is refundable or forfeited depends on how the contract is written and how you handle deadlines.
Common myths to avoid
- It is not the same as your down payment, though it counts toward it at closing.
- Paying a deposit does not guarantee your right to buy if you miss a deadline or a contingency is not met.
- Refunds or forfeiture are driven by contract terms and written notices, not verbal promises.
How Michigan handles your deposit
Michigan purchase agreements include specific clauses for earnest money. The contract should state the amount, who will hold it, when it is due, and how it can be released.
- Who holds the funds: The deposit is usually held in a real estate brokerage’s trust account or by a title or closing company. Your offer will name the escrow holder.
- Timing: Many contracts require delivery within 24 to 72 hours of acceptance. Make sure you know the exact deadline.
- Receipts: Ask for written confirmation that shows the amount, date received, and escrow holder details. Keep this with your records.
If a dispute comes up, the contract rules the process. Standard forms often outline how the escrow holder can release funds, hold them, or seek direction if the parties cannot agree. Options may include mediation, arbitration if agreed, or the escrow holder depositing the funds with a court for resolution. Keep all emails, signed notices, inspection reports, lender updates, and timelines in writing.
How much to expect in Traverse City
There is no single required number. As a general guide, buyers often put down about 1 to 2 percent of the purchase price. In our area, you also see flat amounts, such as $1,000 to $5,000, especially on lower-priced properties. In a highly competitive situation, some buyers raise the deposit to 2 to 5 percent to strengthen the offer.
Local market context
Traverse City has a seasonal rhythm. Spring and summer often bring more listings and more buyers. When inventory is tight or you are competing with multiple offers, a stronger deposit can help signal commitment. In a slower season or on a property with longer days on market, a smaller deposit may be acceptable. Your strategy should balance competitiveness with risk.
Balance strength with safety
A larger deposit can help your offer, but it increases potential loss if you miss a deadline or default. Consider these tactics:
- Choose a neutral escrow holder, such as a title or closing company.
- Keep contingency timelines short but realistic so you can complete inspections and loan steps on time.
- Put every agreement and notice in writing. Never rely on verbal extensions.
Contingencies that protect your deposit
Contingencies are contract clauses that outline what must happen for the sale to proceed. When used correctly and on time, they typically allow you to cancel and get your deposit back.
- Financing contingency: Protects you if you cannot obtain your loan by the stated deadline after making good-faith efforts.
- Inspection contingency: Lets you inspect within a set period and either request repairs or terminate within that window if the home does not meet your needs.
- Appraisal contingency: Allows you to cancel or renegotiate if the property does not appraise at or above the purchase price.
- Title contingency: Protects you if title defects appear and the seller cannot or will not cure them.
- Sale-of-home contingency: If included, ties your purchase to the sale of your current home. These can be less attractive to sellers but keep your deposit protected if written clearly.
- HOA or condo document review: Lets you review association documents and cancel within the stated period if needed.
The key with all contingencies is timing. Know your deadlines, complete your steps promptly, and deliver any termination or repair requests in writing to the correct parties.
Step-by-step for local buyers
Before you write an offer
- Get a full mortgage pre-approval, not just a prequalification.
- Talk with a local agent who understands downtown Traverse City and Grand Traverse County trends.
- Decide on an earnest money amount that fits your price point and competition level. Use 1 to 2 percent as a general starting point, with $1,000 to $5,000 common as flat amounts.
- Choose an escrow holder and confirm where and how funds will be held.
When you submit the offer
- Specify the deposit amount, who holds it, and when it is due.
- Set clear contingency deadlines for financing, inspection, appraisal, and title review.
- Include your pre-approval letter to strengthen your offer.
- If you are out of area, authorize your agent to coordinate inspections and include your availability for quick decisions.
After acceptance
- Deposit the funds by the contract deadline and secure a receipt.
- Schedule the inspection and appraisal immediately.
- Keep communication in writing and track every deadline on a shared calendar.
If issues arise
- Follow the contract’s notice steps exactly if you plan to terminate or request repairs.
- If a dispute over the deposit appears, consult your agent and consider legal counsel or mediation.
At closing
- Your earnest money applies to your down payment or closing costs. Review your settlement statement to confirm the credit.
Tips for out-of-area buyers
Many Traverse City buyers are purchasing a second home or relocating. If you cannot be here in person, plan ahead.
- Book inspections as soon as your offer is accepted. Ask your agent for trusted local vendors.
- Use electronic signatures and clear email subject lines to avoid missed notices.
- Set reminders for contingency dates in your time zone.
- Consider a slightly higher deposit if competition is strong, and pair it with clear, tight timelines.
When to involve an attorney
If you and the seller cannot agree on the release of funds, if a large deposit is at stake, or if you are unsure about your rights under the contract, it is wise to speak with a Michigan real estate attorney. Acting early can save time and reduce stress.
Common mistakes to avoid
- Missing the deposit deadline.
- Relying on verbal agreements or texts instead of signed notices.
- Waiving key contingencies without a plan for risk.
- Offering too little earnest money in a multiple-offer setting.
- Waiting to wire funds until the last minute.
Ready to move forward?
The right deposit can help your offer stand out without putting your money at risk. With smart timelines, clear contingencies, and local guidance, you can compete with confidence in Traverse City and across Grand Traverse County.
If you want a clear plan for earnest money, timelines, and vendor coordination, let’s talk. Hillary Voight and Found Realty Co offer concierge-style guidance for local and out-of-area buyers, from pre-approval to closing, with design-savvy insight into the neighborhoods and seasons that shape northern Michigan living.
FAQs
What is earnest money when buying a home in Michigan?
- It is a good-faith deposit submitted with your offer that is held in escrow and applied to your funds at closing if the deal closes.
How much earnest money should I offer in Traverse City?
- Many buyers use about 1 to 2 percent of the price, or a flat $1,000 to $5,000, with higher amounts in competitive situations.
When is my deposit due after offer acceptance in Michigan?
- Most contracts set a deadline within 24 to 72 hours of acceptance, but you should follow the exact timing in your agreement.
Who holds earnest money in Grand Traverse County?
- Deposits are typically held by a real estate brokerage in a trust account or by a title or closing company named in your contract.
Can I get my earnest money back after a failed inspection?
- If you follow the inspection contingency and deliver proper written notice within the deadline, you can usually cancel and receive a refund.
What happens if there is a dispute over the deposit?
- The purchase agreement controls the process, which may involve mediation, arbitration if agreed, or the escrow holder seeking court direction if the parties cannot agree.
