Buying in Auburn and hearing about earnest money for the first time? You are not alone. Many buyers wonder how much to put down, how to protect it, and when it can be at risk. In this guide, you will learn what earnest money is, typical deposit sizes in Auburn and Placer County, how contingencies work, and the key moments when deposits become non-refundable in California escrow. Let’s dive in.
What earnest money means in Auburn
Earnest money is your good‑faith deposit that accompanies an accepted offer. It shows the seller you are serious and ready to perform. At closing, the deposit is credited toward your down payment and closing costs so it is not an extra fee.
In California, your deposit is held by a neutral third party in escrow, usually a title or escrow company, until closing or mutual written instructions release it. Most local purchase agreements use California Association of Realtors forms that spell out timelines, contingency periods, and remedies if either party does not perform.
How much deposit is typical
In California, typical earnest money ranges from 1% to 3% of the purchase price in normal conditions. In competitive situations, buyers often go 3% to 5% or choose a larger flat amount to stand out. Auburn follows broader Northern California norms, with expectations shifting by neighborhood, price point, and the level of competition.
- When the market is slower, deposits often stay near 1% or a modest flat dollar amount.
- In hotter pockets or price brackets with multiple offers, deposits trend higher.
Here are simple examples:
- On a $500,000 home: 1% is $5,000, 3% is $15,000, and 5% is $25,000.
- On an $800,000 home: 1% is $8,000, 3% is $24,000, and 5% is $40,000.
Sellers also look at your full offer package, not just the deposit size. Proof of funds, a strong pre‑approval, and clear contingency timelines help your offer feel safer.
Contingencies that protect your deposit
Contingencies are built‑in protections that allow you to investigate the home, confirm financing, and review disclosures before fully committing. While a contingency is active, you can usually cancel for reasons allowed by that contingency and get your deposit back if you follow the contract’s rules and deadlines.
Common contingencies in California include:
- Inspection for property condition, including items like pest or roof
- Appraisal to confirm value for the lender
- Financing to secure your loan under acceptable terms
- Title review and HOA documents, if applicable
- Sale of your current home if you need to close that first
Contingencies have clear timeframes that are negotiated in the offer. You can use the inspection period to request repairs or credits. If serious issues arise and cannot be resolved, you may cancel within the inspection period and keep your deposit.
Deadlines and notices matter
To keep your protection, you must follow the contract process. That usually includes delivering written notices by the deadline to remove or keep contingencies, or to cancel for an allowed reason. If you are satisfied with an item, you may remove that contingency in writing. Be careful. Once you remove a contingency, your deposit becomes at risk for that issue.
When your money becomes non‑refundable
There are a few key moments when your deposit can become non‑refundable in a California escrow:
- You remove a contingency in writing and later cancel due to that same issue.
- You miss a deadline or breach the contract after contingency periods expire.
- You agree to a clause that makes the deposit non‑refundable under stated conditions.
- You fail to meet obligations like funding your down payment on time without an allowed reason.
If the seller breaches, such as being unable to deliver marketable title, you are generally entitled to the return of your deposit and may have other remedies. If you breach, remedies depend on your contract. If a liquidated damages clause applies and is selected, the seller’s remedy may be to keep your deposit. Otherwise, the seller could pursue other remedies spelled out in the agreement. Many disputes end with deposit forfeiture or a negotiated release.
Financing denial nuance
If you keep your financing contingency and your lender denies the loan despite your good‑faith efforts, you can usually cancel properly and receive your deposit back. If you waive or later remove that financing contingency and then cannot perform, your deposit may be forfeited.
How escrow releases funds in a dispute
Escrow companies typically need mutual written instructions to release earnest money. If the parties disagree, escrow may hold the funds, interplead the money into court, or follow dispute resolution provisions in the contract. Many California purchase agreements call for mediation or arbitration procedures to resolve deposit disputes.
What sellers value beyond the deposit amount
A strong deposit helps, but sellers look at the total picture. You can improve your offer by:
- Providing proof of funds with the offer, such as a bank statement.
- Submitting a lender pre‑approval, not just a pre‑qualification.
- Presenting a clear plan for contingencies, including realistic timelines.
- Funding your deposit promptly after acceptance, often within 1 to 3 business days.
Step‑by‑step: your Auburn escrow timeline
Use this simple framework to stay on track and protect your deposit.
Before you write an offer
- Meet with a local agent to discuss Auburn and Placer County norms for your price range.
- Get a lender pre‑approval in writing and gather proof of funds for both your deposit and closing.
- Choose a deposit amount that matches your risk tolerance and market conditions.
When you write the offer
- State the deposit amount and how you will deliver it, such as a wire to escrow within a set number of business days.
- Set clear contingency periods for inspections, appraisal, and financing.
- Decide whether to include a liquidated damages clause and understand the implications.
- Include proof of funds with the offer to back up your deposit.
After acceptance
- Deliver the deposit on time per your contract. Timeliness matters to sellers.
- Schedule inspections right away and track all contingency deadlines.
- Remove each contingency only when you are satisfied or advised to do so.
- Keep all communications and notices in writing so there is a clean record.
Sizing your deposit by scenario
Every buyer’s situation is different. Use these general guidelines to frame your strategy:
- Conservative offer in a normal market: Aim for around 1% of the price or a modest flat amount, such as $3,000 to $10,000, to protect your liquidity while keeping the offer strong.
- Competitive situation with multiple offers: Consider 2% to 5% or a larger flat amount, such as $10,000 to $30,000, paired with strong terms and a clear contingency plan.
- Waiving contingencies or offering a non‑refundable deposit: Only for buyers with high risk tolerance who fully understand the consequences.
Real‑world math for Auburn buyers
Seeing the numbers helps you plan your cash:
- $500,000 purchase price: 1% is $5,000, 3% is $15,000, and 5% is $25,000.
- $800,000 purchase price: 1% is $8,000, 3% is $24,000, and 5% is $40,000.
Remember, a larger deposit can get attention, but your financing strength, proof of funds, and clear contingency strategy often carry just as much weight.
Common mistakes to avoid
- Removing contingencies too early. Keep protections in place until you have answers.
- Missing deadlines. Put all dates on a shared calendar, and confirm notices in writing.
- Assuming the deposit is gone if a dispute arises. Escrow holds funds until there is an agreement or a formal resolution.
- Ignoring contract language. Ask questions about liquidated damages, contingency timelines, and what happens if a party does not perform.
The bottom line for Auburn buyers
Your earnest money is a good‑faith deposit that moves with the contract. While contingencies are active and you follow the agreement, you can usually cancel for allowed reasons and keep your funds. Once you remove contingencies or miss deadlines, the deposit becomes at risk. In Auburn and the broader Placer County market, most buyers plan for 1% to 3% in normal conditions and adjust higher in multiple‑offer situations.
Ready to tailor this to your price point and neighborhood? For calm, step‑by‑step guidance from a local advisor, connect with Elena Burns to map out your deposit strategy and write a confident Auburn offer.
FAQs
How does earnest money work in California home purchases?
- It is a good‑faith deposit credited to your down payment or closing at settlement, held in a neutral escrow account until closing or written release instructions.
How much earnest money do Auburn buyers usually put down?
- Typical California deposits are 1% to 3% in normal markets, with 3% to 5% common in competitive situations. Auburn follows these Northern California norms.
What contingencies protect my earnest money in Auburn?
- Inspection, appraisal, and financing contingencies are common. While they are active and you follow the contract, you can cancel for allowed reasons and keep your deposit.
When does my earnest money become non‑refundable?
- After you remove contingencies tied to the issue or miss deadlines and breach the contract. Non‑refundable agreements also make deposits at risk under stated terms.
What if my loan is denied after my offer is accepted?
- If you keep your financing contingency and act in good faith, you can usually cancel properly and receive your deposit back. If you waived it, the deposit may be forfeited.
How quickly do I have to send my deposit to escrow?
- Most contracts call for delivery within 1 to 3 business days after acceptance. Check your specific agreement for the exact timing.
Who decides what happens to the deposit if there is a dispute?
- Escrow typically needs mutual written instructions. Without agreement, funds may be held, interpleaded into court, or handled under the contract’s dispute resolution terms.
