What Is Earnest Money in Minnesota?

If you are getting ready to write your first offer in Minneapolis, you will hear the term earnest money right away. It can feel like one more cost to plan for, especially when you are watching your budget. The good news is that this deposit is designed to protect both you and the seller, and it usually counts toward your closing funds. In this guide, you will learn what earnest money is in Minnesota, how much to expect in the Twin Cities, when it is due, and how to keep it safe as you move from offer to closing. Let’s dive in.

Earnest money basics in Minnesota

Earnest money is a buyer’s good‑faith deposit that becomes part of your purchase agreement once the seller accepts your offer. It signals that you are serious and helps your offer stand out. At closing, it is typically credited toward your down payment or closing costs.

In Minnesota, the deposit is usually held in escrow. Common holders include the listing broker’s trust account, a title or escrow company, or less often your buyer’s broker. The escrow holder and instructions should be written into your purchase agreement. The widely used Minnesota form has specific lines for the amount, timing, and escrow details, which you can review in the Minnesota REALTORS standard purchase agreement.

For background on how broker trust accounts work, see the Minnesota Department of Commerce guidance on broker trust accounts. For a plain‑English overview of earnest money and how it is handled at closing, the National Association of REALTORS explanation of earnest money is also helpful.

Typical amounts in Minneapolis

There is no single number that fits every property or neighborhood. Many entry‑level Twin Cities purchases use deposits in the $1,000 to $5,000 range. In competitive price points or with higher‑priced homes, you may see deposits based on a percentage, often 1% to 3% of the purchase price.

What can push the amount higher:

A popular listing with multiple offers
New construction or a builder contract
Offers with fewer contingencies

When smaller deposits may work:

Slower listings or a buyer‑leaning market
Property types where modest deposits are common, such as some condos or townhomes

Some buyers offer “non‑refundable” earnest money to compete. This is risky. Non‑refundable language can mean you forfeit the deposit if you back out for reasons not covered by a contingency. Only agree to that if you fully understand the risk and your contract protections.

Timelines and key deadlines

Your purchase agreement sets the deadlines. In the Twin Cities, you typically deliver earnest money to the named escrow holder within 24 to 72 hours of acceptance. Some contracts require delivery at acceptance. Always follow the exact written instructions.

Other common timelines that affect your deposit:

Inspection period: often 3 to 10 days after acceptance
Loan approval or financing deadline: commonly 7 to 21 days
Appraisal timeline: usually tied to the financing deadline
Closing date: often 30 to 45 days from acceptance

Track these dates carefully. Missing a deadline can weaken your rights to a refund.

How the deposit is applied at closing

At closing, your earnest money shows up on the settlement statement as a credit to you. If your required cash to close is $20,000 and you put in $5,000 for earnest money, you would bring the remaining $15,000. The escrow holder and title company handle the accounting so the credit is applied correctly.

If the deal falls through

If you cancel for a reason allowed by the contract, your earnest money is generally returned. If you default without a valid contingency, the seller may be entitled to keep it.

Common buyer contingencies

Inspection contingency. If the inspection finds material issues and you cancel within the inspection window, your deposit is usually refunded.
Financing contingency. If you cannot secure financing by the deadline and you provide the required notice, you typically receive your deposit back.
Appraisal contingency. If the appraisal comes in low and you cancel per the contract, your deposit is usually returned.
Title or sale‑of‑home contingency. Unresolved title problems or an unmet sale‑of‑home clause can allow cancellation with a refund.

For a general primer on how contingencies work, see this Nolo overview of purchase contingencies.

If you default, seller remedies

If you breach the contract without an applicable contingency, Minnesota purchase agreements often allow the seller to keep the earnest money as liquidated damages. Depending on the form used, the seller may also have other remedies unless the contract limits them. Review the exact language in your agreement and meet every notice and cure deadline.

How disputes are handled in Hennepin County

If you and the seller disagree about who gets the deposit, the escrow holder will follow the written instructions in the contract. In many cases they will hold the funds until both parties sign a release or a court order is issued. If needed, disputes can be resolved through negotiation or litigation in Hennepin County district court. For local process context, see Hennepin County property and recording resources.

Smart protections for Twin Cities buyers

Get fully preapproved before you write. It strengthens your financing contingency and timelines.
Write clear, specific contingency deadlines in the offer. Use calendar dates or precise day counts.
Choose a deposit amount you are comfortable with. If you prefer a moderate deposit, consider strengthening other terms, such as a flexible closing date.
Confirm the escrow holder and get a written receipt. Keep proof of payment.
Send notices in the form the contract requires. Use email or certified methods if specified.
Avoid non‑refundable language unless you accept the risk and have discussed it with your agent or an attorney.

Local market notes for Minneapolis

Neighborhood and price point matter. A deposit that works for a downtown condo may be too light for a competitive single‑family listing in southwest Minneapolis or western suburbs.
Market cycles shift. In a seller‑leaning season, stronger deposits are common. In a cooler market, smaller deposits and more contingencies often fly.
New construction differs. Builder contracts can require larger or staged deposits and different timelines. Read builder agreements closely before signing.

Quick example: how it plays out

You offer $375,000 on a Minneapolis home with a $5,000 earnest money deposit and standard inspection, appraisal, and financing contingencies. The seller accepts. You deliver the deposit to the title company within 48 hours. During inspection, you find a repair issue and negotiate a credit, so you continue. Your appraisal meets value, and your lender issues final approval by the financing deadline. At closing, that $5,000 is credited toward your cash to close, which reduces the amount you wire that day.

Ready to move forward?

If you want a clear plan for your earnest money, timelines, and contingencies, you are not alone. With 15 years of local experience and hundreds of successful Twin Cities closings, we will help you write a strong offer and protect your deposit from acceptance to closing. Reach out to Blake Halverson Real Estate to start your home search with confidence.

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