Wondering how much earnest money you should include when you write an offer in Prior Lake? You are not alone. That deposit can help your offer stand out, but it also carries risk if the deal falls apart.
In this guide, you will learn what earnest money is, typical amounts for Prior Lake, how it is handled in Minnesota transactions, and when you might get it back. You will also get simple checklists for buyers and sellers so you can move forward with confidence. Let’s dive in.
Earnest money basics
Earnest money is a good-faith cash deposit that accompanies your purchase offer. It signals to the seller that you are serious and helps bind the agreement once it is accepted. At closing, it is usually applied to your cash to close.
It is not a separate fee. What happens to your deposit depends on the purchase agreement and its contingencies. Your written contract controls the amount, who holds it, the delivery deadline, and how it is released.
How it works in Minnesota and Prior Lake
In Prior Lake and across Scott County, most agents use standardized Minnesota purchase agreement forms. These forms include fields for the earnest money amount, who will hold it, and the release rules.
The deposit is typically held by a named escrow holder. That could be a title or escrow company, a real estate brokerage’s trust account, or an attorney’s trust account. Minnesota regulates how brokers and escrow holders handle client funds, and the contract will name the holder and the timing for delivery.
Whether you get your earnest money back is tied to the contract’s contingencies. Common ones include inspection, financing, appraisal, and sometimes the sale of your current home. If you cancel according to a contingency within the allowed timeline, you typically receive a refund.
Typical amounts in Prior Lake offers
There is no single number that fits every Prior Lake home. As a general guide:
- Smaller or lower-priced homes often see $1,000 to $3,000.
- Many offers fall in the range of 1% to 3% of the purchase price.
- Competitive listings may call for 3% to 5% or a higher flat amount.
Your amount depends on price point, local inventory, and how competitive the property is. Larger earnest money can strengthen your offer, but it increases your risk if you waive contingencies or miss deadlines. Align your deposit with your risk tolerance and the market conditions on that specific listing.
Timing and delivery expectations
Purchase agreements typically require delivery of earnest money within a short window after acceptance. Many contracts call for delivery upon acceptance or within 1 to 3 business days. Your offer should name the escrow holder and the delivery method.
Plan ahead so you can wire funds or deliver a check on time. After delivery, ask the escrow holder for written confirmation of receipt. Keep that receipt with your contract paperwork.
Who holds the funds
In Scott County, title and escrow companies frequently act as the escrow holder for earnest money. A brokerage’s trust account can also hold the deposit if the contract names the firm. The purchase agreement will identify the exact holder and how the funds are to be applied or released.
You should know where the funds are going before you sign. Confirm wiring instructions directly with the named company, and follow safe transfer practices.
How contingencies protect your deposit
Contingencies spell out when you can cancel and receive your earnest money back. The key is timing and following the steps in your contract.
Inspection contingency
If you terminate within the inspection period according to the contract, you typically get a full refund. If you do not act before the deadline, you may lose that protection.
Financing contingency
If your financing falls through and you properly terminate under the financing contingency, your deposit is typically refunded. If you waived financing or miss the deadline, the seller may have remedies.
Appraisal contingency
If the appraisal comes in below the purchase price, you can usually renegotiate or terminate if your contract allows it. Whether you get a refund depends on the appraisal clause and whether you follow the required steps on time.
Sale-of-home contingency
If you need to sell your current home first, your contingency will set the terms. If you cannot sell and you terminate according to the contingency, the contract may call for a refund. The specific language controls the outcome.
Default, seller remedies, and dispute paths
If a buyer defaults outside of allowed reasons, the seller may have remedies under the contract. These can include keeping the earnest money as liquidated damages or pursuing other remedies, depending on the written agreement.
If a seller defaults, the buyer is often entitled to a return of earnest money and may have other contract remedies. Some Minnesota contracts include mediation or arbitration provisions for disputes. If the parties cannot agree, release of funds can require a mutual agreement, a court order, or an action by the escrow holder.
In most successful sales, there is no issue. The deposit simply becomes part of your funds at closing.
Real-world scenarios you might face
- Major defect found during inspection, buyer cancels on time: earnest money is typically refunded.
- Appraisal comes in low, buyer cancels under appraisal clause: earnest money is usually refunded if steps are followed correctly.
- Buyer waives inspection, later backs out due to a condition: seller may keep the deposit under the contract, and the buyer could face additional liability.
- Multiple offers, buyer posts a large deposit but financing fails: if the buyer kept a financing contingency and cancels correctly, the deposit may be refunded. If the buyer waived that contingency, the seller may claim the funds.
Local tips for Prior Lake buyers and sellers
Prior Lake sits in the Twin Cities metro and draws interest for lake access and recreation, commute options, and neighborhood convenience. When inventory is tight, offers tend to move faster and deposits often trend higher. When supply improves, buyers sometimes use more modest deposits.
As a buyer, ask your agent about the competitive posture of that specific listing. As a seller, look at the earnest money amount alongside other terms such as contingency lengths and the lender strength of the buyer.
Simple, non-legal clause examples
Use your agent’s standard forms. Your final wording should come from the form and any local addenda used in Scott County. To understand the spirit of common clauses, consider these illustrative examples:
- Basic structure: “Buyer will deposit $X as earnest money with [Escrow Holder] within [Y] business days of acceptance. Funds will be applied to the purchase price at closing. Release or disbursement will follow the Purchase Agreement terms and contingencies.”
- Inspection-based refund: “If Buyer terminates before the inspection contingency deadline, the escrow holder will return the earnest money to Buyer, subject to the Purchase Agreement.”
These are examples to help you understand the mechanics. Always rely on the actual contract language you sign.
Buyer checklist: earnest money in Prior Lake
- Decide on your deposit amount based on price, competition, and your risk tolerance.
- Confirm the escrow holder and verify wiring or delivery instructions before sending funds.
- Track all contingency periods and note the exact deadlines in your calendar.
- Be ready to wire or deliver funds within the timeframe stated in your offer.
- After delivery, get written confirmation that the escrow holder received your deposit.
Seller checklist: protecting your position
- Review the deposit amount in context with the full offer terms and buyer strength.
- Confirm the named escrow holder and the deadline for deposit delivery.
- Require written confirmation of deposit receipt after acceptance.
- Track contingency deadlines and understand what happens if the buyer cancels or defaults.
- If a dispute arises, consult your agent and consider speaking with a Minnesota real estate attorney.
Common pitfalls to avoid
- Waiving key contingencies without understanding the risk to your deposit.
- Missing a termination deadline by a day and losing protection.
- Sending funds without verifying escrow holder instructions.
- Assuming the deposit is automatically refundable. It is controlled by the contract.
How Chestnut Realty supports your offer
You deserve clear, practical guidance on a detail that can make or break your offer. Our Scott County team regularly navigates earnest money terms on suburban homes, lake properties, new construction, and land. We help you align your deposit with current local norms, your price point, and the competitiveness of the listing.
With on-staff appraisal expertise, we understand valuation and appraisal risks that affect your deposit. We coordinate with trusted local title and escrow companies, keep your timelines organized, and connect you with mortgage resources so your financing and earnest money work together.
Ready to put together a confident Prior Lake offer? Talk with your agent about earnest money strategy, then let our team help you manage the details from contract to closing.
For local guidance and a steady hand at every step, connect with the professionals at Chestnut Realty.
FAQs
How much earnest money should I offer in Prior Lake?
- Many offers fall around 1% to 3% of price, with $1,000 to $3,000 common on lower-priced homes and higher amounts used for competitive listings.
When is earnest money due after my offer is accepted in Minnesota?
- Most contracts require delivery upon acceptance or within a few business days, so plan to wire or deliver funds within the exact deadline stated in your agreement.
Who holds the earnest money in Prior Lake transactions?
- The purchase agreement names the escrow holder, often a title or escrow company, a brokerage trust account, or an attorney’s trust account.
Can I get my earnest money back if I cancel after inspection?
- If you terminate within the inspection period and follow the contract steps, you typically receive a refund; missing the deadline can change that outcome.
What happens to my deposit at closing in Prior Lake?
- In most successful sales, the earnest money is applied to your cash to close or purchase price per the contract.
What if the appraisal is low and I have an appraisal contingency?
- You may renegotiate or terminate per the clause; if you cancel according to the contract and timeline, your deposit is typically refunded.
