What Is Earnest Money in Colorado?

Wondering how much earnest money you need to put down in Denver, and what happens to it if things change? You are not alone. Earnest money can feel confusing, especially in a fast-moving market. In this guide, you will learn what earnest money is in Colorado, how much buyers in Denver typically offer, when it’s refundable, and the steps to protect your deposit from contract to closing. Let’s dive in.

Earnest money in Colorado

Earnest money is a good-faith deposit you provide when a seller accepts your offer. It shows commitment and is usually credited to your down payment and closing costs at closing. It also gives a seller temporary reassurance that you are serious.

In Colorado, most residential purchases use Colorado Association of REALTORS forms. Your signed contract sets the amount, who holds the deposit, when it is due, and what happens if a deal falls through. The contract controls whether earnest money is refundable, becomes liquidated damages if you default, or is handled another way.

Who holds it and when you pay

Your contract will name the escrow holder. In Denver, the deposit is commonly held by a title or escrow company, though a broker’s trust account can also be used. The escrow holder must follow the contract’s instructions for releasing funds.

Delivery deadlines are also set in your contract. In the Denver area, buyers often deliver earnest money within 24 to 72 hours after the offer is accepted. Always follow the exact timeline in your agreement and get a written receipt.

How much in Denver

There is no fixed rule for deposit size. In many recent Denver-area deals, buyers offer about 1% to 3% of the purchase price. In highly competitive situations or certain price points, deposits of 3% to 5% or more may be used to stand out.

Local conditions change by neighborhood, price range, and interest-rate climate. As inventory and competition shift, norms can change quickly. Ask your agent for current benchmarks in your specific submarket before you write an offer.

When it’s refundable

Whether you get your earnest money back depends on your contract and if you met the deadlines and notice rules tied to your contingencies.

Inspection contingency

Most buyers have time to inspect the home and raise objections. If you object or terminate within the inspection period according to the contract’s procedures, your deposit is typically refundable.

Financing contingency

If you make a good-faith effort but cannot secure your loan, you can usually terminate and recover your deposit as long as you meet the notification and documentation requirements by the deadline.

Appraisal contingency

When a loan requires the home to appraise at or above the purchase price, a low appraisal can trigger options. You may renegotiate, bring extra cash, or terminate under the appraisal or financing terms if your contract provides that right and you give timely notice.

Title contingency

If a title defect appears and cannot be cured within the contract timeline, you may have a right to terminate and receive a refund.

HOA and document review

For condos or homes in HOAs, you may be able to terminate and recover your deposit if the association documents are not acceptable to you and you act within the contract period.

Deadlines and notices matter

Contracts include specific deadlines for inspections, appraisals, financing, title review, and HOA documents. You must provide written notice the way the contract requires to preserve your rights. Missing a deadline or giving notice the wrong way can put your deposit at risk.

Keep copies of every notice and request confirmation of delivery. If your lender denies the loan, save the denial letter and follow any documentation steps in the contract.

Real-world examples

• Example A: You have a 10-day inspection period, find issues, and deliver a termination notice within the deadline using the contract method. Your earnest money is refunded.
• Example B: You waive the inspection contingency, then find costly defects and cancel. Without a contractual right to terminate, you may lose your deposit.
• Example C: Your lender denies the loan despite good-faith efforts. You notify the seller and provide required documentation within the financing deadline. Your deposit is refunded.

Seller remedies and disputes

If a buyer defaults, seller remedies depend on what the contract allows. Many contracts include a liquidated damages option where the seller retains the earnest money as the sole remedy. If the contract does not limit remedies, the seller may seek actual damages or specific performance through the courts.

Escrow holders follow the contract. If there is a dispute, they usually will not release funds without a mutual written release signed by both parties or a court order. Disputes can take weeks or months to resolve, so keep your paperwork organized.

Buyer checklist: protect your deposit

• Read the earnest money clause and every contingency deadline before signing.
• Confirm who is holding the deposit and get a written receipt when you deliver it.
• Deliver funds within the contract window, often 24 to 72 hours in Denver.
• Track every deadline and send notices exactly as the contract requires.
• Keep copies of inspection reports, loan updates, and appraisal results.
• If you remove or shorten contingencies to compete, weigh the risk of losing your deposit.
• Budget for a larger deposit if you plan to write a strong offer in a hot area.

Offer strategies in Denver

• Increase earnest money modestly to show seriousness, but stay within your comfort zone.
• Use shorter contingency periods instead of waiving protections.
• Consider creative terms such as escalation language, making a portion non-refundable after key dates, or offering seller concessions rather than a permanently larger deposit.

When to involve an attorney

Consider hiring an attorney if you are asked to sign non-standard deposit language, if a dispute arises that you cannot resolve through your agents or escrow, or for high-value transactions where litigation risk is higher. Getting clarity early can save time and money.

Get local guidance you can trust

Colorado’s standard forms provide a clear framework, but every offer is different. A local, experienced agent can help you choose the right deposit size, manage deadlines, and preserve your rights while keeping your offer competitive. If you are planning to buy in Denver or the South Metro suburbs, reach out for step-by-step guidance from the first showing to a smooth close.

Ready to get started? Connect with Unknown Company for calm, local-first support from offer to closing.

FAQs

How much earnest money do Denver buyers usually put down?

• Many recent Denver-area offers include about 1% to 3% of the purchase price, with higher amounts in competitive situations.

Who holds my earnest money in a Denver purchase?

• The contract names the holder, typically a title or escrow company in Denver, or sometimes a broker’s trust account.

When do I have to pay my earnest money in Colorado?

• Your contract sets the deadline. In Denver it is often within 24 to 72 hours after acceptance, but follow the exact timeline in your agreement.

Is my earnest money refundable if I cancel after inspection?

• If you terminate within the inspection period and follow the contract notice rules, your deposit is typically refundable.

What happens if my home does not appraise in Denver?

• You can try to renegotiate, bring extra cash, or terminate under your appraisal or financing terms if your contract allows and you meet the deadline.

Can a seller keep my earnest money in Colorado?

• If you cancel without a contractual right or miss deadlines, the seller may be able to keep the deposit as liquidated damages, depending on your contract.

How are earnest money disputes resolved in Denver?

• Escrow holders usually require a mutual release or a court order. Until there is agreement or a legal decision, funds are held in escrow.