You have one chance to make a confident first impression when you write an offer in Los Angeles. That moment often hinges on your earnest money. It signals that you are serious, and it can be the detail that wins you the home or exposes you to unnecessary risk. If you have questions about how much to put down, when it is due, and how to protect it, you are not alone.
In this guide, you will learn what earnest money is, typical LA deposit ranges, how contingencies protect you, and smart ways to structure a competitive offer without taking on more risk than you intend. Let’s dive in.
What earnest money is
Earnest money is a good-faith deposit you provide after a seller accepts your offer. The funds are held in an escrow or title company trust account until closing or release per written instructions. At closing, the deposit is credited toward your down payment and closing costs.
It is not an extra fee. Your deposit reduces what you bring to close. If the sale does not move forward and you followed the contract’s contingency rules, the deposit is typically returned to you.
How deposits work in California contracts
Most Los Angeles transactions use California Association of Realtors forms that spell out the deposit amount, how it will be held, and what happens in a dispute. Escrow holders act only according to the written contract and escrow instructions. They do not release funds unless both parties agree in writing or a court orders it.
If there is a dispute about who should get the deposit, the escrow company may file an interpleader with the court so a judge can decide. This process can add time and legal costs, which is why clear contract language and on-time notices matter.
Typical earnest money in Los Angeles
Across many markets, deposits are often 1 to 3 percent of the purchase price. In LA, the percentage guidance still applies, but dollar amounts vary with price tier and neighborhood competition. On a lower-priced home, a flat-dollar deposit that feels large can be common. On higher-end properties, sellers often expect larger dollar figures, even when the percentage is similar.
Here is simple example math to help you visualize scale:
- $800,000 purchase price: 1 percent equals $8,000.
- $1,500,000 purchase price: 1 percent equals $15,000.
In multiple-offer situations, buyers sometimes offer more or split deposits into stages. Cash buyers are also expected to show proof of funds. Sellers pay attention to both the size of your deposit and the strength of your documentation.
How earnest money protects you
Buyer safeguards through contingencies
Contingencies are your safety net. Common ones include loan, inspection, appraisal, and title. If you properly exercise a contingency within the contract deadline, your deposit is returned per the agreement. To keep that protection, you must meet written timelines and provide clear written notices when you remove contingencies or cancel.
Seller protections and deposit risk
If a buyer breaches the contract without a valid contingency, the seller may have the right to keep the deposit as liquidated damages or pursue other legal remedies, depending on what the contract allows. If you waive contingencies and then cannot close, your risk of losing the deposit increases. The specifics depend on the terms you negotiate and sign.
Make your offer competitive and safe
Ways to strengthen your offer
- Increase the deposit to show commitment.
- Use staged deposits, such as a smaller initial amount at acceptance and a second deposit within a few days.
- Pair the deposit with strong pre-approval or proof of funds, plus efficient timelines for inspections and loan steps.
Keep your safeguards intact
- Keep written contingencies in place unless you fully understand the risk.
- Tie staged deposits to milestones that are clearly described in your contract and agreed to by the seller.
- Avoid depositing more than you are willing to forfeit if you later remove contingencies and cannot close.
Timeline, delivery, and security
Your purchase agreement will set the deadline for delivering your deposit, often within a short window after acceptance. Standard contingency periods are negotiable. Inspection windows are commonly around 10 days, and loan-related periods often run 17 to 21 days, though your contract will control.
You can deliver funds by cashier’s check, wire transfer, ACH, or broker trust check. Personal checks may be slower. Always confirm wire instructions directly with your known escrow contact by phone before sending funds. Wire fraud targets real estate transactions, so follow escrow and bank security steps closely.
Common scenarios and outcomes
- Inspection findings: If you cancel within your inspection contingency, your deposit is typically returned.
- Low appraisal: If you have an appraisal contingency and the valuation comes in low, you can attempt to renegotiate or cancel and recover your deposit.
- Financing issues: If your loan is denied and you timely exercise a loan contingency, your deposit is generally returned.
- Waived contingencies and default: If you remove protections and do not close, the seller may keep your deposit or seek other remedies per the contract.
- Disagreements: When parties cannot agree on who gets the deposit, escrow may hold funds or interplead to the court until there is a resolution. Many disputes settle with a mutual release.
Quick checklist for LA buyers
Before you offer:
- Decide on a deposit amount in line with the home’s price and competition level.
- Secure a strong pre-approval or proof of funds.
- Clarify which contingencies you will include and the timelines you can meet.
After acceptance:
- Deliver the deposit to escrow by the deadline and secure a receipt.
- Schedule inspections and lender steps immediately.
- Track all contingency dates in writing.
During escrow:
- Send any cancellation or contingency removal in writing according to the contract.
- Keep your agent and escrow informed about loan and appraisal status.
Before removing contingencies:
- Confirm you have inspection results, loan status, and appraisal findings in hand.
- Understand your exposure if you proceed without certain protections.
Work with a trusted advisor
In a competitive LA market, the right deposit strategy helps you stand out without taking on unnecessary risk. Thoughtful structure, clean documentation, and clear timelines are what sellers and escrow look for. If you want a financially savvy approach to deposits, contingencies, and negotiation, connect with a local expert who understands both the numbers and the nuance.
If you are planning a purchase in Los Angeles, from the San Fernando Valley to the Westside, let’s create a strategy that fits your goals and comfort level. Reach out to Monica Yekani to get started.
FAQs
How much earnest money should a Los Angeles buyer offer?
- Many buyers offer 1 to 3 percent of the purchase price, adjusted for price tier and competition, with higher dollar amounts common on luxury properties.
Will my deposit be refunded if my inspection finds issues?
- If your contract includes an inspection contingency and you cancel within the deadline using proper written notice, the deposit is typically returned per the agreement.
Can the seller keep my deposit if the sale falls through in LA?
- Yes, if you breach the contract without a valid contingency, the seller may keep the deposit as liquidated damages or pursue other remedies, subject to your contract.
How do I deliver earnest money safely to escrow?
- Use a cashier’s check, wire, ACH, or broker trust check, and always verify wire instructions by phone with your known escrow contact to avoid fraud.
What happens if the appraisal comes in low on my LA purchase?
- If you have an appraisal contingency, you can renegotiate or cancel and recover your deposit. Without it, you may need to bring more cash or risk losing the deposit.
Should I waive contingencies to win a bidding war in Los Angeles?
- Waiving loan or appraisal protections increases deposit risk. Consider a larger or staged deposit plus shorter, realistic timelines instead of full waivers.
When is my earnest money applied to my closing in California?
- At closing, escrow applies your deposit toward your down payment and closing costs, reducing the funds you need to bring to close.
