Earnest Money Explained for Annapolis Homebuyers

Are you wondering how much earnest money you need to put down on a home in Annapolis, and how to keep it safe? You are not alone. This is one of the first questions buyers ask when they start a search in Anne Arundel County. In this guide, you will learn what earnest money is, how it moves through a Maryland purchase, the key contingencies that protect it, and simple steps to avoid costly mistakes. Let’s dive in.

What earnest money is

Earnest money is your good-faith deposit that accompanies an accepted offer. It shows the seller you intend to follow through on the contract. The deposit is not an extra fee. If the sale closes, it is typically applied to your down payment and closing costs on the settlement statement.

You can deliver earnest money by personal check, cashier’s check, wire transfer, or approved electronic payment. The form and timing are written into your contract. The escrow holder will provide a receipt once funds are deposited into a trust account.

Earnest money in Annapolis and Anne Arundel County

Who holds your deposit

In Maryland, the deposit is usually held by a neutral third party. In many Annapolis transactions, the title or settlement company that will handle closing holds the funds in an insured escrow account. In some cases, the listing brokerage’s trust account holds the deposit if that is what the contract specifies.

Both title companies and brokerages must keep client funds in fiduciary escrow accounts and account for them according to industry standards. You should receive written confirmation showing the amount, date received, and the escrow holder’s information.

Step-by-step flow of funds

1. You and the seller sign a Maryland purchase contract that states the deposit amount, deadline to deliver it, who holds it, and contingency deadlines.

2. You deliver earnest money to the named escrow holder within the contract timeline, often within 2 to 5 business days.

3. The escrow holder deposits the funds and issues a written receipt.

4. If the sale closes, the deposit is applied to your closing costs and/or down payment.

5. If the contract ends under an allowed contingency and you meet the notice deadline, the deposit is returned per the contract. If you default, the seller may keep the deposit as liquidated damages, subject to the contract and any dispute resolution process.

Typical earnest money amounts

Typical deposits vary with price and competition. In many markets, buyers offer about 1% to 3% of the purchase price or a flat amount, such as $1,000 to $10,000. In competitive Annapolis segments with lower inventory, buyers sometimes increase deposits or tighten timelines to strengthen their offers. Local norms can shift quickly, so confirm current practices with your agent and settlement company before you write an offer.

Contingencies that protect your deposit

Inspection contingency

A home inspection contingency lets you inspect the property and either negotiate repairs or cancel within a set period. Many contracts use a 7 to 10 day inspection window, although the timeline is negotiable. In busier markets, some buyers shorten the window to be more competitive. To keep your deposit safe, deliver any inspection-related notices in writing before the deadline.

Financing and appraisal contingencies

A financing contingency protects you if your lender cannot approve the loan by the deadline. Many Maryland contracts use a loan approval period of about 21 to 30 days, depending on your lender and the terms you negotiate. An appraisal contingency protects you if the appraised value comes in below the contract price. You may be able to renegotiate or cancel and recover your deposit if you act within the contract rules.

Title, HOA, and lead-based paint

Title and association document review periods allow you to review title commitments and HOA or condo documents. If unacceptable issues arise and the seller cannot cure them, you can cancel and protect your deposit if your notice is timely. For homes built before 1978, federal law requires lead-based paint disclosures and provides inspection rights. Discuss any added inspections you want to include so the protection is clearly written into the contract.

Deadlines and notice rules

Every contingency needs a clear deadline and a clear way to deliver notice. Your contract will state how to give notice, which may include email, courier, or certified mail. If you miss a deadline or do not send proper notice, you risk losing your earnest money even if the issue is legitimate. Build in realistic timelines with your lender, inspector, and title company to avoid last-minute surprises.

Strengthen your offer and stay safe

If you are competing for a home in Annapolis, you can still make a strong offer without putting your deposit at unnecessary risk.

• Consider a larger earnest money amount while keeping key protections in place.
• Shorten your inspection window rather than waiving it.
• Get a written mortgage pre-approval, not just a prequalification.
• Ask that a neutral title company hold funds and issue a receipt.
• Clearly state how notices will be delivered and by what deadline.

What happens if a deal falls through

If you follow the contract and cancel under an allowed contingency within the deadline, your deposit should be returned. If you back out without an allowed contingency or miss a deadline, the seller may keep the deposit as liquidated damages, depending on the contract. If the seller defaults, you may be entitled to the return of your deposit and potentially other remedies based on the contract and applicable law.

Many contracts outline dispute resolution steps. Title companies will not release funds without mutual written instructions from both parties or a court order. If there is a disagreement, mediation is often the first practical step before litigation. Funds may remain in escrow until both sides sign a release or a court directs the escrow holder.

Local tips for Annapolis buyers

Annapolis features many older homes and historic districts. Consider extra inspections for structure, chimney, radon, and potential lead paint, and allow adequate time in your contract to review results. Waterfront and coastal properties may involve seawall condition, flood zones, and flood insurance. These factors can affect appraisals and financing timelines, so give your lender and appraiser enough time.

When wiring earnest money, always verify instructions directly with the title company by phone using a known number. Wire fraud is a real risk. Confirm account details before sending any funds and never rely only on email for changes to wiring instructions.

Quick buyer checklist

• Before you offer

  • Get a written mortgage pre-approval.
  • Ask your agent about recent deposit patterns for similar Annapolis homes.

• Writing your offer

  • State the earnest money amount and name the escrow holder, ideally the title company.
  • Include inspection, financing, appraisal, and title/HOA protections unless you accept the risks of waiving them.
  • Set specific deadlines and list acceptable notice methods in the contract.

• Delivering funds

  • Follow the contract method and deadline. Get a written receipt.
  • If wiring funds, verify instructions by phone with the title company before you send anything.

• During contingencies

  • Schedule inspections immediately and keep lender documents moving.
  • Send any objections or termination notices in writing before deadlines.

• After acceptance

  • Confirm with the escrow holder that funds are received and held in an insured trust account.
  • Track key dates for inspections, loan approval, appraisal, and title document review.

Ready to move with confidence?

If you want clear, local guidance on earnest money, timelines, and how to craft a competitive offer in Annapolis, you are in the right place. Let a neighborhood-savvy advisor help you protect your deposit and secure the home you want. Reach out to Lauren H. Thompson to start a focused plan for your next move.

FAQs

How much earnest money is typical in Annapolis?

• Many buyers offer around 1% to 3% of the purchase price or a flat amount, and the exact number depends on price point and how competitive the listing is at the time.

Who holds earnest money in Maryland home purchases?

• A neutral title or settlement company often holds the deposit in escrow, though some contracts name the listing brokerage’s trust account as the holder.

Can I get my earnest money back if financing falls through?

• Yes, if your contract includes a financing contingency and you deliver the required written notice within the deadline set in the contract.

What if the appraisal comes in low in Anne Arundel County?

• An appraisal contingency may allow you to renegotiate with the seller or cancel and recover your deposit if you follow the contract’s notice and timing requirements.

How is earnest money applied at closing in Maryland?

• If the sale closes, your deposit is typically credited toward your down payment and/or closing costs on the settlement statement.

How do I avoid wire fraud when sending my deposit?

• Call the title company using a verified phone number to confirm wiring instructions, and never rely on emailed changes to account numbers without verbal confirmation.