Buying in Milford and wondering how earnest money really works? You are not alone. The deposit can feel confusing, especially when you are trying to write a competitive offer on a shoreline home or a commuter-friendly condo. In this guide, you will learn what earnest money is, how much is typical in Milford, when to pay it, how it is protected, and what happens if your deal falls through. Let’s dive in.
What earnest money is
Earnest money, sometimes called a good-faith deposit, is the money you put down after a seller accepts your offer. It shows you are serious about buying. If you close, that deposit is credited toward your down payment and closing costs.
This deposit serves three roles:
- Signals your commitment in a competitive market.
- Gives the seller partial security if a buyer breaches the contract.
- Works as a performance mechanism under your purchase agreement.
If the contract ends under one of its contingencies, the deposit is typically returned to you per the release terms in the agreement.
Who holds your deposit in Connecticut
In Connecticut, many transactions involve attorneys. It is common for a buyer’s attorney, seller’s attorney, or a local title or escrow company to hold the earnest money in a dedicated escrow account. In some cases, a listing broker’s escrow account may be used.
Confirm in writing who will hold the funds, the account type, and how the money will be accounted for and released. Your purchase agreement should state these details clearly.
How much is typical in Milford
Across many U.S. markets, earnest money often ranges from about 1% to 3% of the purchase price. In more competitive situations, deposits of 3% to 5% are more common.
In Milford, the amount you choose often reflects local demand:
- Shoreline listings and renovated homes can attract multiple offers. Sellers may expect larger, more confident deposits.
- Homes near rail, I-95, or convenient routes to New Haven and Bridgeport often see stronger buyer demand. A larger deposit can help your offer stand out.
- During slower seasons or in less competitive niches, smaller deposits and more contingency protections are more common.
Dollar examples at common price points
Here are quick examples to help you scale your deposit:
- $300,000 purchase: 1% = $3,000, 2% = $6,000, 3% = $9,000
- $600,000 purchase: 1% = $6,000, 2% = $12,000, 3% = $18,000
- $900,000 purchase: 1% = $9,000, 2% = $18,000, 3% = $27,000
Some buyers use a flat-dollar approach, such as $1,000 to $5,000, especially at lower price points. The key is that the deposit feels meaningful and competitive for the property and market conditions.
When you pay and how to deliver
Due dates and receipts
You typically include the deposit with your written offer or deliver it within a short window after acceptance. Many contracts call for delivery within 24 to 72 business hours. Always follow the exact timing in your accepted agreement and get a written receipt.
Payment methods and wire safety
Common payment methods include personal check, certified or cashier’s check, or a wire transfer to the escrow or trust account. If you wire funds, confirm the instructions by phone using a verified number or in person. Do not rely only on an email. Ask for the escrow account details and a receipt showing the payer, amount, date, and a reference to your contract.
If the deal falls through
Contingencies that protect you
Most contracts include contingencies that allow you to cancel and receive your deposit back if you follow the terms and deadlines. Common protections include:
- Home inspection contingency
- Financing or mortgage contingency
- Appraisal contingency
- Title or encumbrance review and, for condos, document review
- Attorney review provisions, if included
If you terminate within the contingency window and follow the notice procedure in your contract, your earnest money is usually returned.
When a seller may keep it
If you miss deadlines or back out for reasons not covered by your contingencies, the seller may be entitled to keep the deposit as liquidated damages. In some contracts, the seller may also pursue additional damages. Each agreement is different, so understand whether the deposit is the sole remedy or not before you sign.
How disputes get resolved
If both parties agree to release the funds, the escrow holder follows your signed instructions. If you disagree, the escrow holder usually keeps the funds in the account until receiving a mutual release or a court order. Some contracts include mediation or arbitration provisions. Timelines vary, but escrow holders do not release money without proper direction.
Strategy tips for Milford buyers and sellers
For buyers
- Match your deposit to competition and your comfort with risk. On highly sought-after shoreline homes, consider a larger deposit to show strength.
- Keep essential protections. Only waive inspection, appraisal, or financing contingencies if you fully accept the risks.
- Have funds ready. Know who will hold escrow before you submit the offer and confirm delivery steps.
- Prefer attorney or title escrow. These neutral third parties commonly manage funds in Connecticut.
For sellers
- Ask for a meaningful deposit. This discourages non-serious offers and signals commitment.
- Use a neutral escrow holder. An attorney or title company provides formal escrow accounting and clear release steps.
- Clarify remedies. Know if your contract caps remedies at the deposit or allows additional damages.
Your offer checklist
Before you sign or submit an offer, confirm and record:
- Exact deposit amount and form of payment
- Name, contact, and account designation of the escrow holder
- Delivery deadline and what counts as delivery, such as cleared funds
- All contingency deadlines and how to give notice if you need to terminate
- Release and dispute resolution steps in the contract
The bottom line in Milford
Earnest money is a simple idea with important details. The right amount and timing can make your offer more compelling on a Milford shorefront listing, while clear contingencies protect you if something changes. Keep everything in writing, meet your deadlines, and use a neutral escrow holder to avoid surprises.
If you want help tailoring a deposit strategy to a specific Milford property, reach out to an experienced Connecticut advisor who can align your offer with local conditions and your risk tolerance. For direct guidance and a smooth path from offer to closing, connect with scott wright.
FAQs
What is earnest money in a Milford home purchase?
- Earnest money is a good-faith deposit you pay after your offer is accepted, held in escrow, and credited to you at closing if the sale completes.
How much earnest money is typical for Milford buyers?
- Many offers fall in the 1% to 3% range of the purchase price, with 3% to 5% more common on competitive shoreline or renovated properties.
When is earnest money due after my offer is accepted?
- Contracts often require delivery within 24 to 72 business hours. Follow the exact timing in your accepted agreement and get a receipt.
Who should hold my deposit in Connecticut?
- Neutral third parties are common, such as a buyer’s or seller’s attorney or a local title or escrow company with a trust account.
Can I get my deposit back if I cancel after inspection?
- If you terminate within the inspection contingency window and follow the contract’s notice procedure, you typically receive your deposit back.
What happens to my deposit if the home does not appraise?
- If you have an appraisal contingency and cancel under its terms, your deposit is usually returned. If you waived that contingency, you may risk forfeiting the deposit.
How are earnest money disputes resolved in Milford transactions?
- Escrow holders generally require a signed mutual release or a court order. Some contracts include mediation or arbitration to resolve disputes.
