What if the best part of your offer is not your price? In Colorado, the earnest money you put down can make or break a deal, especially in close-knit markets like Manitou Springs. If you are buying, you want to know when that deposit is safe and when it is at risk. If you are selling, you want confidence that a buyer will follow through. This guide explains what earnest money is, how it works in Colorado, how much is typical in El Paso County, and how to protect yourself from disputes and wire fraud. Let’s dive in.
Earnest money basics in Colorado
Earnest money is a good-faith deposit you pay after your offer is accepted. It shows you intend to complete the purchase and helps your offer stand out. A neutral third party holds the funds until closing under the terms of the contract.
If the sale closes, your deposit is credited toward your down payment or closing costs. If the contract ends under a valid contingency, your money is typically refundable. If you default outside a contingency, the seller may be able to keep the deposit under the contract.
How it works in Manitou Springs
Where your deposit is held
In Colorado, earnest money is usually held by a title company or escrow agent named in the contract. Sometimes a licensed brokerage’s trust account holds it. The holder must keep the funds in a proper trust or escrow account and account for the money according to state rules.
When you deliver funds
Your contract sets a firm deadline. Common practice is to deliver earnest money within 1 to 3 business days after the offer is accepted. Always get written confirmation from the title or escrow company that they received your funds and where they are held.
How much to expect
A common range in Colorado is 1 to 3 percent of the purchase price. For lower-priced homes, buyers sometimes use a flat amount, such as 1,000 to 5,000 dollars. In competitive moments in Manitou Springs and the wider El Paso County market, buyers may offer more to strengthen an offer. Local custom and price point matter.
When earnest money is refundable
Common contingencies that protect you
- Inspection: You have a set period to inspect the property and can terminate within that window if allowed by the contract.
- Financing: If you cannot obtain your loan within the time allowed and follow the notice steps, you can usually recover your deposit.
- Appraisal: If the appraisal is low and you do not proceed, your contract may allow a refund if you give proper notice.
- Title: If the seller cannot deliver marketable title, you may be able to terminate and recover funds.
- HOA document review: For condos or planned communities, unfavorable documents can be grounds to end the contract within the review period.
Deadlines and notices matter
Your protections depend on strict compliance with the contract. You must deliver notices by the stated deadlines and in the required form. Missing a deadline can turn a refundable situation into a risk of losing your deposit.
If the seller breaches
If the seller fails to perform, such as refusing to deliver good title, you may be able to terminate and demand your funds back. Your exact remedies depend on the contract and facts.
When a seller may keep it
If a buyer fails to perform and no valid contingency applies, the seller may have remedies that include keeping the earnest money as liquidated damages. Some contracts let a seller seek other remedies, such as specific performance or actual damages. The written contract controls which remedy applies.
Avoid problems and protect your funds
Buyer checklist
- Confirm the named title or escrow company in your contract.
- Deliver your deposit by the deadline and keep the receipt.
- Track all contingency deadlines and send required notices on time.
- Document communications with your agent, lender, and the seller side.
- Understand how your deposit ties into your closing funds.
Seller checklist
- Confirm the escrow holder is an independent title or escrow company.
- Require on-time proof of deposit from the buyer.
- Watch contingency dates and request updates as each milestone passes.
- If a buyer misses a deadline, consult your agent about contract remedies.
Prevent wire fraud
- Verify wiring instructions by calling the title company using a trusted phone number.
- Do not rely on email alone for instructions or last-minute changes.
- Confirm account numbers in person or by a verified call before sending funds.
- Ask the title company to confirm receipt the same day.
Handling disputes over earnest money
If there is a dispute, the escrow holder will not release funds without written agreement by both buyer and seller or a court order. The holder may deposit the funds with the court through an interpleader action and let the court decide. Some contracts include mediation or arbitration provisions. Keep copies of notices and receipts since timing and documentation often decide outcomes.
Local tips for strong offers
Manitou Springs is a small, desirable community near Colorado Springs. Inventory and seasonality influence what is customary. In a tighter market, a larger deposit can help your offer stand out if you are confident in your financing and inspection plan. As a seller, look at the earnest money size along with the buyer’s financing strength and timelines to gauge commitment.
Key takeaways
- Earnest money is a good-faith deposit held by a neutral party and credited at closing.
- Typical amounts in Colorado are 1 to 3 percent, but local norms vary.
- Refunds depend on contingencies and strict compliance with deadlines and notice steps.
- If a buyer defaults, the seller may keep the deposit under the contract.
- Use a named title or escrow holder, get receipts, and follow safe wire practices.
You do not have to navigate this alone. If you are buying or selling in Manitou Springs or anywhere along the Pikes Peak corridor, reach out to the trusted, hands-on local team that will guide you from first step to closing. Connect with The Sims Home Team to talk strategy for your situation.
FAQs
How much earnest money should I offer in Manitou Springs?
- Many buyers offer 1 to 3 percent of the price, with fixed amounts more common at lower price points and larger deposits possible in competitive conditions.
When do I pay earnest money in Colorado?
- Your contract sets the deadline, which is often within a few business days after acceptance, and you should always obtain a written receipt from the title or escrow company.
Where is earnest money held in El Paso County?
- Funds are typically held by a named title or escrow company, or sometimes a broker’s trust account, in an insured trust or escrow account.
Is earnest money refundable if my loan falls through?
- It is usually refundable if you follow the financing contingency terms and notice deadlines stated in your contract.
What happens if the appraisal comes in low?
- If your contract includes an appraisal contingency and you give timely notice, you may be able to terminate and recover your deposit if you choose not to proceed.
Who decides an earnest money dispute in Colorado?
- The escrow holder typically needs a mutual written release or a court order, and may file interpleader so a court can decide if the parties do not agree.
How can I avoid wire-fraud when sending earnest money?
- Call the title company using a verified phone number to confirm wiring instructions, never trust unverified emails, and confirm receipt immediately after sending funds.
