Understanding Connecticut Earnest Money Rules for Buyers
Buying a home in Mystic, Stonington, or elsewhere along the Connecticut coast often moves quickly, and the earnest money you put down can set the tone for your entire transaction. You want your offer to stand out without risking your deposit. The good news is that with the right contingencies and timelines, you can protect your interests and still be competitive. In this guide, you’ll learn how earnest money works in Connecticut, what’s typical locally, and the best steps to keep your funds safe. Let’s dive in.
Earnest money, sometimes called a good-faith deposit, is the money you put down when your offer is accepted to show the seller you are serious. It is not your down payment. At closing, it is credited toward your down payment or closing costs. If your contract allows, it can also be refunded when a contingency is properly invoked.
Sellers like earnest money because it shows commitment and offers some protection if a buyer backs out after contingencies are removed. Buyers benefit because a solid deposit can strengthen an offer, especially when paired with clear contingencies and deadlines that keep your money protected.
The amount varies by price point and market conditions. In many transactions, a typical range is roughly 1 to 3 percent of the purchase price. In practical terms for our area, you’ll often see deposits from about 1,000 to 10,000 dollars, with higher amounts on luxury or waterfront homes.
In competitive situations, buyers sometimes offer larger deposits to stand out. Remember, the deposit is negotiable. The right number depends on the property, the seller’s expectations, and how strong you want your offer to be.
Your contract will spell out when the deposit is due. Commonly, you will deliver the initial deposit when the offer is accepted or within 24 to 72 hours. Some contracts call for an additional deposit later, such as after attorney review or once inspections are completed.
In Connecticut, closings are often attorney-led. Earnest money is typically held in an escrow or trust account by the listing broker, your attorney, the seller’s attorney, a title or settlement company, or an independent escrow agent. The escrow holder must keep client funds in a designated trust account and follow strict recordkeeping rules.
You can provide funds by certified check, an attorney escrow check, a personal check that must clear, or a wire transfer. Some sellers prefer certified funds or an attorney escrow check. Always get a written receipt with the amount, the holder’s name, and where the funds were deposited.
The contract contingencies you include are what keep your earnest money refundable during due diligence. Pay close attention to timelines and the notice requirements in your agreement.
This gives you time to inspect the home and negotiate repairs or cancel as allowed by the contract. A common window is 7 to 14 days from acceptance to complete inspections and a few days to deliver requests or notices. In our area, plan for general home, septic, well, chimney, pest, and environmental checks if needed. Older or coastal properties may need additional evaluations.
A financing contingency protects you if you cannot obtain a mortgage commitment in time. Many buyers receive 21 to 30 days to secure a loan commitment, though this can vary by lender and loan type. The appraisal contingency protects you if the appraised value comes in below the purchase price. You may be able to renegotiate or cancel if your contract permits.
Connecticut attorneys typically handle the title search and review. If there are title issues, they must be cured or negotiated. If the contract addresses unresolved title matters, you may be able to cancel and recover your deposit if problems are not corrected.
If you need to sell your current home first, this contingency can keep your deposit protected within the agreed timeframe. It may be less competitive, so speak with your agent about strategy before including it.
For Mystic, Stonington, and other coastal communities, be sure to review FEMA flood zones and flood insurance availability, and confirm any elevation certificates. If the property uses a septic system or a private well, prioritize those inspections. Waterfront or wetlands-related permits and riparian rights can also require additional review time.
Your earnest money is typically refundable if you cancel within an active contingency period as set by your contract, or if the seller cannot meet a contractual obligation, such as delivering clear title. Always give notice in writing and within deadlines.
A seller may keep the deposit if a buyer breaches the contract after contingencies are satisfied or removed and the buyer withdraws without seller consent. The details depend on the contract language, so know your obligations and timelines before you remove protections.
If there is a dispute, contracts may call for mediation, arbitration, or litigation. In practice, escrow holders often require a mutual written release or a court order to disburse contested funds. An escrow holder may file an interpleader so a court can decide. Because closings here are attorney-led, your attorney can help navigate deposit questions and next steps.
Use this checklist to keep your deposit safe and your offer strong.
Coastal properties often fall within FEMA flood zones, which can affect insurance costs and lender requirements. Review flood maps early, confirm insurance availability and premiums, and ask for any elevation certificates on file. Confirming these details can impact your appraisal and monthly costs.
Historic and older homes in Mystic and Stonington may have aging systems. Plan for thorough inspections and, if needed, specialty evaluations. Private septic and well systems are common outside town centers, so bring those to the top of your inspection list.
Seasonal dynamics also matter. Summer can be busy with second-home buyers, which can push deposits and competition higher. Give yourself realistic timelines, and make sure your contingencies reflect the extra due diligence coastal properties often require.
Earnest money is a normal and useful part of buying a home in Connecticut. When you set the right deposit amount, include smart contingencies, and meet your deadlines, you protect yourself while keeping your offer competitive. Approach each step with clarity, lean on your local professionals, and keep your paperwork tight.
If you are planning a move in Mystic, Stonington, or anywhere in New London County, reach out to the Donna Dean Team for local guidance tailored to your goals.
We pride ourselves in providing personalized solutions that bring our clients closer to their dream properties and enhance their long-term wealth. Contact us today to find out how we can be of assistance to you!