Ever wonder why sellers ask for a deposit with your offer? That good‑faith payment is called earnest money, and it can make or break your deal. If you are buying or selling in Plymouth or Canton, understanding how earnest money works will help you protect your interests and move to closing with confidence. In this guide, you will learn what earnest money is, how much is typical, how contingencies protect you, and what to expect if a deal closes or falls apart. Let’s dive in.

What earnest money means

Earnest money is a deposit you provide with a signed offer to show you are serious about buying. It is not a government fee. It is a contractual deposit that is usually credited to your down payment or closing costs at closing.

This deposit strengthens your offer and gives the seller some protection if you default on the contract. The amount, timing, and rules for returning or releasing the deposit are defined by your purchase agreement.

How it works in Plymouth and Canton

In Plymouth and Canton, the purchase agreement names where the deposit will be held. Common escrow holders include a title company or closing agent, a real estate broker’s trust account, or less often, an attorney escrow. Funds sit in a segregated escrow or trust account until closing or a dispute is resolved.

Most contracts require you to deliver the deposit soon after the seller accepts your offer, often within 24 to 72 hours. You can usually pay by certified check, wire transfer, or another approved electronic method. The contract controls the exact method and timeline, so read it closely and follow your agent’s instructions.

How much to offer

There is no single rule for deposit size. In this area, you will see two common approaches:

• A flat amount, often a few thousand dollars for many listings
• A percentage of the purchase price, commonly 1 to 3 percent

Market conditions and price range influence what is typical. In multiple‑offer situations, buyers sometimes increase the deposit to stand out. New construction and builder contracts often require larger, structured deposits, and condominiums or short sales may include additional requirements. Your agent can help you match your deposit strategy to the property and competition.

Contingencies and refunds

Contingencies are your main protection for getting your deposit back if something changes. They set conditions that must be met for the sale to move forward. If you act within the deadlines, your deposit is typically refunded when you cancel under a covered contingency.

Inspection contingency

An inspection contingency gives you time to inspect the home and request repairs or cancel if major issues arise. If you cancel within the inspection window according to the contract terms, you normally receive your deposit back.

Financing and appraisal contingencies

A financing contingency allows you to cancel if you cannot secure loan approval by the deadline. An appraisal contingency protects you if the property appraises below the purchase price. If you follow the steps and timelines in the contract, your deposit is generally refunded if you cancel for these reasons.

Title review and home sale contingency

A title contingency gives you the right to review the title commitment and cancel if significant defects cannot be cleared. Some buyers also include a home sale contingency, which ties the purchase to the sale of their current property. This is less common in competitive markets but can still be used in certain situations.

If the deal closes or falls apart

When the sale closes, your earnest money is applied to your down payment or closing costs on the settlement statement. If the seller breaches the contract, you are generally entitled to a refund and may have other remedies.

If you default without a permitted reason, the seller may be entitled to keep the deposit. Some contracts include a liquidated damages clause that allows the seller to keep the deposit as full damages if the buyer defaults. If no such clause exists, a seller seeking the deposit may need to prove actual damages or use the dispute process outlined in the contract.

How escrow disputes are handled

The purchase agreement will explain how disputes are resolved. Many contracts call for mediation, arbitration, or litigation. Escrow holders, such as a title company or a broker, will not release funds without mutual written instructions or a final decision under the contract’s dispute process. If the parties cannot agree, the escrow holder may require a court action to determine who receives the funds.

Buyer checklist for Plymouth/Canton

Use this quick list to keep your deposit safe and your timeline on track:

• Confirm who will hold the deposit, and get the escrow account details in writing.
• Prepare proof of funds for the deposit and a loan pre‑approval before you write your offer.
• Decide on the deposit amount and payment method, and know the delivery deadline after acceptance.
• Calendar all contingency deadlines, including inspection, financing, appraisal, and title review.
• Understand how your deposit will be credited at closing.
• If you plan a larger deposit to strengthen your offer, consult your lender and, if needed, an attorney about any implications.

Seller checklist for Plymouth/Canton

Protect your position by confirming these points when you accept an offer:

• Verify where the deposit will be held, and request proof of deposit once the buyer pays it.
• Ensure the contract states how the deposit is handled if the buyer defaults, including any liquidated damages language.
• Review contingency timelines so you understand when the buyer can cancel with a refund.
• If a dispute arises, follow the contract’s instructions and consider consulting an attorney before authorizing a release of funds.

Special situations

New construction often requires larger deposits and staged payments under the builder’s contract. Read those terms carefully and ask about refund conditions.

Short sales and foreclosures can involve extra approvals and longer timelines. Your deposit may be subject to lender rules and additional contingencies.

Condominiums may include association addenda and reviews that affect contingency periods. Make sure you understand those timelines before you waive any conditions.

Local logistics to expect

In suburban Wayne County, including Plymouth and Canton, title companies are commonly used to hold earnest money and coordinate closing. Brokers can also hold deposits in trust accounts when the contract specifies it. Earnest money is not recorded with the county. Only deeds, mortgages, and certain documents are recorded with the Wayne County Register of Deeds. At closing, the escrow holder applies the deposit according to the settlement statement and the signed instructions.

Smart questions to ask your agent

• Who will hold the earnest money, and how do I verify the trust or escrow account?
• When do I have to deliver the deposit, and what payment methods are allowed?
• Which contingencies should I include, and what are the exact deadlines?
• How will my deposit be applied at closing?
• What happens to my deposit if the other party breaches the contract?
• What is the dispute process if we disagree about releasing funds?

Next steps

Earnest money is simple in concept but is controlled by detailed contract terms and timelines. When you understand the deposit amount, delivery rules, contingencies, and dispute steps, you can make a stronger offer and avoid costly surprises.

If you want help tailoring your deposit strategy to today’s Plymouth and Canton market, reach out to The Faeth Team for clear guidance, a local offer plan, and a smooth path to closing. Get your free home valuation.

FAQs

How much earnest money is typical in Plymouth/Canton?

• Buyers often use either a flat amount in the low thousands or a percentage of the price, commonly 1 to 3 percent, with higher deposits in competitive situations.

Who usually holds the earnest money in Plymouth/Canton?

• A title company or closing agent commonly holds deposits, though a listing or buyer broker’s trust account can also serve as escrow if the contract specifies it.

When is earnest money due after offer acceptance?

• Most contracts require delivery within a short window, often 24 to 72 hours after mutual acceptance, using a method approved in the agreement.

When can a buyer get the earnest money back?

• If the buyer cancels within the contract deadlines under a covered contingency, such as inspection, financing, appraisal, or title, the deposit is typically refunded.

What happens to earnest money at closing in Michigan?

• The deposit is credited toward the buyer’s down payment or closing costs according to the final settlement statement.

Can a seller keep the earnest money if a buyer backs out?

• If the buyer cancels outside allowed contingencies or misses deadlines, the seller may be entitled to keep the deposit as outlined in the contract and any liquidated damages clause.

How are earnest money disputes resolved locally?

• The purchase agreement controls, often calling for mediation, arbitration, or litigation; escrow holders usually require mutual written instructions or a final decision before releasing funds.