Earnest Money in Michigan: What Buyers Should Know

Buying a home in Clare is exciting, but writing a check before you even move in can feel stressful. You want your offer to stand out without putting your money at risk. The good news is that with the right terms and timelines, you can use earnest money to strengthen your offer and still protect your deposit. In this guide, you’ll learn what earnest money is in Michigan, how much to offer in Clare, which contingencies matter, and how to avoid common mistakes. Let’s dive in.

What earnest money is in Michigan

Earnest money is a good-faith deposit you offer at or shortly after your purchase agreement is accepted. It shows the seller you’re serious about buying. In Michigan, it’s not set by law; it’s controlled by your contract and general contract rules.

At closing, your deposit is usually credited toward your down payment and closing costs. If the deal ends for a reason allowed by your contract, you typically get your deposit back. If you breach the agreement without a contractual reason, the seller may be able to keep your deposit or seek other remedies based on the contract language.

Your deposit is held in a neutral escrow or trust account. In Michigan, this is often a listing broker’s trust account, the buyer’s agent’s broker trust account, a title company, or an attorney escrow. Release of funds follows the purchase agreement and any joint escrow instructions. If there’s a dispute, the parties may need a mutual release, mediation or arbitration if the contract calls for it, or a court order.

How much earnest money in Clare

There isn’t a single “typical” number that fits every Clare property. The amount depends on price point, how competitive the listing is, and your own comfort with risk. In many markets, buyers offer a few hundred dollars up to a few thousand dollars in standard situations, and around 1–3% of the purchase price in competitive situations.

To choose an amount in Clare, look at current market conditions. If inventory is tight or days on market are low, a stronger deposit can help your offer stand out. If the market is balanced, a modest deposit paired with strong pre-approval often does the job. Ask your agent what sellers in Clare are expecting for your price range, and whether to include pre-approval or proof of funds with your offer.

Key contingencies that protect your deposit

Contingencies are your safety net. They outline when you can cancel and recover your deposit. Read each deadline and notice requirement closely, and deliver all notices in writing.

Inspection contingency

Most Michigan offers include a home inspection period. If you inspect and cancel within that window per the contract, your earnest money is typically refundable. If you find issues, you can negotiate repairs or concessions, or cancel on time if the contract allows.

Financing contingency

If your offer depends on getting a mortgage, the financing contingency sets your timeline to apply and secure approval. If you receive a timely, documented loan denial within the contingency period and follow the notice instructions, you usually get your deposit back. Missing the application or notice deadlines can put your deposit at risk.

Appraisal contingency

If the home appraises below the contract price and your contract allows cancellation or renegotiation, you may be able to cancel and recover your deposit. Some agreements require you to attempt a price adjustment first; if you can’t reach terms, you can cancel as directed in the contract.

Title and survey

If title problems surface that the seller cannot fix by the agreed deadline, many contracts allow the buyer to cancel with a deposit refund. Survey issues that affect use or boundaries can be handled similarly if your contract includes that protection.

Seller default

If the seller refuses to perform, you generally can recover your deposit and may have other remedies available under the contract. Your options depend on the exact terms you agreed to.

When you could lose earnest money

You risk forfeiting your deposit if you walk away outside of your contractual rights. This often happens when a buyer changes their mind after the inspection window closes, or fails to deliver required notices on time. Contracts may include a liquidated damages clause, which is an agreed amount the seller can keep if the buyer defaults. Some contracts also allow specific performance, which is a request for a court to require one party to perform under the contract.

Watch for a “time is of the essence” clause. If it’s in your offer, deadlines are strict. Even a short delay can threaten your protections. Always request extensions in writing before a deadline expires.

How escrow and refunds work in Michigan

Your purchase agreement will name the escrow holder and explain how funds are handled. After deposit, the escrow holder follows the contract’s instructions for release. If both parties agree on a release, it’s typically straightforward.

If there’s a dispute, the escrow holder usually cannot release funds without a mutual release or a court order. Some contracts provide for mediation or arbitration before court. Keep all documentation that supports your position, including inspection reports, lender denial letters, and appraisal results.

Practical steps to protect your deposit

Use this quick checklist from offer to closing:

• Before you sign:

  • Name a clear escrow holder and where funds will be deposited.
  • Include inspection, financing, appraisal, title, and survey protections that fit your situation.
  • Set realistic timelines and require mutual written agreement to change any deadlines.
  • Decide on an earnest amount that matches market conditions without adding unnecessary risk.

• Right after acceptance:

  • Deliver your deposit on time as the contract requires.
  • Schedule inspections immediately to avoid deadline crunch.
  • Apply for your mortgage right away and keep written proof of application.

• During due diligence:

  • Track every deadline on a shared calendar and set reminders.
  • Send all notices in writing, exactly as the contract instructs.
  • Keep copies of inspection reports, appraisal, and any lender letters.

• If you need to cancel:

  • Act before the contingency window closes.
  • Use the contract’s required notice method and keep confirmation of delivery.
  • Ask the escrow holder what documents they need to process a release.

Clare buyer scenarios (hypothetical examples)

These examples are for illustration only. Actual outcomes depend on your contract and timing.

• Example A — Slow market, single offer:

  • List price $150,000. You offer $1,500 earnest money, a 10-day inspection period, and a 21-day financing contingency. If the inspection reveals major roof issues and you cancel within the 10-day window, your deposit is refunded.

• Example B — Competitive market, multiple offers:

  • List price $200,000. You offer $6,000 earnest money and a 7-day inspection period with strong pre-approval. If the inspection window closes without cancellation and you later cannot obtain financing, you may forfeit the deposit unless your financing contingency protections were properly preserved.

• Example C — Title defect discovered:

  • Your agreement requires clear title. A lien is found that the seller cannot cure by the deadline. You cancel under the contract and your deposit is refunded.

• Example D — Missed deadlines:

  • You had 10 days for inspection but did not send a cancellation or repair request in writing before the deadline. You later cancel and the seller claims default. Outcome depends on the contract and dispute process, but your deposit is at risk.

Negotiation tips for Clare buyers

• Pair a reasonable deposit with a strong pre-approval. This tells Clare sellers you can perform without putting more at risk than needed.
• In a competitive situation, a larger deposit or shorter inspection window can help. Balance this with clear protections and strict internal reminders.
• Avoid non-refundable deposits unless you fully understand the risks and have advice from your agent or attorney.
• Consider using a local title company or attorney as escrow holder for clear procedures and recordkeeping.
• Keep every notice in writing and confirm delivery per the contract’s instructions.

Ready to move forward?

With the right strategy, earnest money can help you win a Clare home while keeping your interests safe. We’ll help you set the right deposit, choose smart contingency timelines, and stay on top of every notice and deadline. If you’re ready to start house-hunting or want a second look at your offer terms, reach out to the Daniella Bell Group. Let’s find your La Bella Vita in central and northern Michigan.

FAQs

In Michigan home purchases, is earnest money the same as a down payment?

• No. It’s a separate good-faith deposit at offer acceptance, later credited toward your down payment and closing costs at closing.

In Clare, Michigan, how much earnest money should a buyer offer?

• There is no single correct amount. Consider a modest deposit in standard markets and 1–3% of the price in competitive situations, based on your risk tolerance and current local conditions.

If I change my mind after signing a Michigan purchase agreement, can I get my earnest money back?

• Only if your contract’s contingencies allow cancellation, such as inspection, financing, appraisal, or title. Canceling outside those protections can lead to forfeiture.

In Michigan transactions, who holds the earnest money deposit?

• Often the listing broker’s trust account, a title company, the buyer’s agent’s broker trust account, or an attorney escrow. Your contract should name the holder.

What if a seller in Michigan refuses to release my earnest money?

• Check your contract and escrow instructions. The escrow holder usually needs a mutual release or a court order. If the contract provides for mediation or arbitration, consider using it, and consult an attorney for guidance.