Wondering how earnest money works when you buy a home in Edina? You want a strong offer that stands out, but you also want to protect your deposit if things change. In this guide, you’ll learn what earnest money is, how it’s handled in Hennepin County, what’s typical in Edina, and how to structure a competitive offer without unnecessary risk. Let’s dive in.
Earnest money basics
Earnest money is a good-faith deposit you include with an accepted purchase offer. It shows the seller you intend to follow through. It is not your down payment, but it is usually applied to your closing costs or down payment at closing.
The purchase agreement specifies the deposit amount, who holds it, when you must deposit it, and what happens if either party fails to perform. If the sale closes, the deposit shows up as a credit on your closing statement and reduces your final cash to close.
How it works in Edina
Where the money goes
After the seller accepts your offer, you deliver funds by check or wire to the named escrow holder. That can be a title or escrow company or a broker’s trust account. The holder deposits your funds into a trust account and issues a receipt.
Who holds the funds
In Edina, it is common for a title or escrow company to hold earnest money, though some listing brokers use their trust accounts. Your purchase agreement should name the holder so everyone knows where the money will go.
What the contract says
Minnesota uses standardized forms from Minnesota REALTORS. The Residential Real Estate Purchase Agreement and Joint Escrow Instructions include fields for the deposit amount, who holds it, when you will deposit it, contingency dates, and remedies if either party breaches. The exact language in your signed contract controls outcomes.
Where it shows at closing
If the sale is completed, the earnest money appears as a buyer credit on your closing disclosure. It lowers the cash you need to bring to the table.
Typical amounts in Edina
There is no fixed rule for how much to offer. In many Twin Cities transactions, a common range is 1 to 3 percent of the purchase price for single-family homes. In multiple-offer situations in Edina, buyers sometimes offer more, such as 2 to 5 percent, to strengthen the offer. In slower markets or on lower-priced homes, some buyers use a flat amount, like 1,000 to 2,500 dollars.
For example, on a 500,000 dollar home, 1 percent is 5,000 dollars and 2 percent is 10,000 dollars. These are illustrations only. Your strategy should reflect current competition, your comfort level, and advice from your local agent.
Deposit timing and proof
Your offer should state when you will deposit the money. In Edina, common timelines are 24, 48, or 72 hours after both parties accept the offer. The contract controls, so write the deadline clearly to avoid misunderstandings.
After you deliver funds, ask the escrow holder for a written receipt. Keep this for your records. If you wire funds, confirm wiring instructions directly with the holder and be alert to fraud risks.
Contingencies that protect you
Contingencies are contract conditions that allow you to cancel and receive a refund if certain things do not go as planned. The most common include:
- Inspection contingency. You can cancel within the inspection period and seek a refund by following the contract’s notice steps.
- Financing contingency. If you cannot obtain your loan by the stated deadline and you provide proper notice, your deposit is usually refundable.
- Appraisal contingency. If the property appraises below the purchase price and you use the appraisal terms correctly and on time, you may be able to cancel or renegotiate.
- Title contingency. If a title issue cannot be resolved within the contract timeframe, you can terminate and request your refund.
- Sale-of-home contingency. If included, this can protect your funds if your current home does not sell. If you do not include it, your risk increases.
To preserve your refund rights, give written notice within the contingency period as your contract requires. Verbal notice or late notice can put your deposit at risk.
Refunds and releases
When you cancel for a valid contract reason, the escrow holder usually needs a signed release or other written instructions to return funds. Minnesota forms often include procedures for releasing earnest money if both parties agree. If there is a dispute, the contract may call for mediation, arbitration, or other steps.
Keep written documentation to support your position. For example, hold on to inspection reports, lender letters, or appraisal reports. These can help resolve a disagreement quickly.
When you could lose it
If you miss deadlines, waive protections, or fail to close after all contingencies are satisfied or expire, the seller may be entitled to keep your earnest money. Many Minnesota contracts include a liquidated damages clause that allows the seller to retain the deposit if you breach the agreement. In some situations, other remedies may be available depending on contract language and local law.
If the seller defaults, you usually can recover your deposit and may have other options, such as pursuing specific performance, depending on the contract.
Competitive and safe strategies
Set the right amount
A larger deposit can help your offer stand out in Edina, but it also increases your exposure if you waive contingencies or miss deadlines. Many buyers choose a moderately higher amount paired with strong, clear protections rather than a very large, unconditional deposit.
Use tight but realistic timelines
Shorter inspection windows and clean terms are attractive to sellers. Balance that with your need to complete inspections, verify financing, and review title. Choose timeframes you can meet based on your lender’s and inspector’s schedules.
Inspection strategy
Keep a standard inspection contingency and schedule your inspector right after acceptance. Typical windows in many markets are 7 to 14 days. If you consider a limited inspection to compete, do it only with full knowledge of the added risk.
Financing and appraisal strategy
Keep your financing contingency unless you are paying cash or are fully prepared for the risk. Coordinate your loan commitment deadline with your lender before you write the offer. If appraisal risk is high, include an appraisal contingency or plan for an appraisal gap you are comfortable covering.
Escrow best practices
Name a reputable title or escrow company in Hennepin County as the holder. Confirm that funds will be held in a trust account, and request a deposit receipt. Ask about disbursement procedures so you understand how refunds are handled if needed.
If you consider waiving protections
Waiving inspection or financing contingencies can help you compete, but it exposes your deposit if problems arise. This approach is best reserved for buyers who fully understand the risk and have the financial capacity to absorb surprises.
Buyer checklist
- Get a current lender preapproval before you write offers.
- Set your earnest money strategy with your agent based on market competition and your risk tolerance.
- Name the escrow holder and specify your deposit deadline in the purchase agreement.
- Schedule inspections immediately after acceptance, and give any termination notice in writing before the deadline.
- Keep proof of deposit, such as the receipt from the escrow or title company.
- Track every contingency date, including inspection, financing, appraisal, and title.
- If your financing is denied, obtain a written denial and deliver it per your contract.
- If you have escrow concerns, ask your agent to recommend a known title company with a strong track record in Hennepin County.
Quick scenarios
- Multiple offers in Edina. You choose a 3 percent deposit with a 7-day inspection and a strong preapproval. Your offer signals commitment while keeping protections in place.
- Financing falls through. You apply promptly but receive a timely denial letter before your financing deadline. You give written notice as required and seek a refund.
- Low appraisal. The appraisal comes in below price. You use your appraisal contingency within the deadline and either renegotiate or cancel per the contract.
- Seller default. The seller cannot deliver clear title. You terminate under the title terms and request your deposit back.
Work with a local expert
Your earnest money strategy should match the pace of the Edina market, your financing plan, and the property you want. A seasoned local advisor can help you draft clean terms, choose the right timelines, and keep your deposit protected while presenting a winning offer.
If you are planning a move in Edina or the western suburbs, connect with Mark Parrish. As a top-producing Twin Cities professional with deep local expertise, Mark can help you structure offers that are both competitive and safe.
FAQs
How much earnest money should I offer in Edina?
- Many buyers offer 1 to 3 percent of the price, and increase the amount in competitive situations based on advice from a local agent.
When do I get earnest money back if I cancel?
- If you cancel under a valid contingency and deliver written notice within the contract deadlines, the deposit is usually refundable under the contract’s release terms.
Who holds earnest money in Hennepin County?
- A named title or escrow company or a broker’s trust account typically holds the funds, and you should receive a receipt confirming the deposit.
Can a seller keep my deposit and still sue me?
- Some contracts limit the seller’s remedy to keeping the deposit as liquidated damages, but in other cases additional damages may be possible depending on the agreement and local law.
Is my earnest money safe in escrow?
- Licensed escrow and title companies hold funds in trust accounts and follow handling procedures; choose a reputable holder and verify deposit and release steps with your agent.
