Buying in Old Town and not sure how much earnest money to put down? You are not alone. This small but important deposit signals that you are serious and helps secure the home while you complete due diligence. In this guide, you will learn how earnest money works in Chicago, what is typical in Old Town, how timelines and contingencies protect you, and what happens if a deal falls apart. Let’s dive in.
What earnest money is
Earnest money is a cash deposit you make when your offer is accepted to show good faith and bind you to the purchase contract. If the sale closes, the deposit is credited toward your purchase price and closing costs. It is different from fees like inspections or appraisals. Think of it as a performance deposit that motivates the seller to take the home off the market while you complete inspections, financing, and title review.
Typical amounts in Old Town
In the Chicago market, a common guideline is about 1% to 3% of the purchase price, though the range varies by property and competition. For many Old Town condos or smaller units, buyers often put down about 2,500 to 10,000 dollars. For townhouses and single-family homes, deposits often start around 10,000 dollars and can rise to several percent of the price in competitive situations. In multiple-offer scenarios, buyers sometimes increase the deposit or tighten timelines to strengthen their offer.
How to choose your deposit amount
The right amount depends on price point, market conditions, and your overall offer terms. If you have strong financing and short, clear contingencies, you may not need an oversized deposit to be competitive. If the property is attracting multiple offers, a higher deposit can help your offer stand out. Your goal is to show commitment without putting more at risk than necessary under your contract’s protections.
When your deposit is due
Your signed contract will specify the deadline to deliver earnest money. In Chicago, it is often due upon acceptance or within 24 to 72 hours. Do not assume the timing. Confirm the exact deadline and delivery method in your executed contract, then send funds by certified check or wire right away. Always request a written receipt.
Who holds your earnest money
Your contract names the escrow holder and provides delivery instructions. In Chicago, deposits are commonly held by a title or closing company, the listing broker’s trust account, or sometimes an attorney’s escrow account. Many buyers prefer title company escrow because it is neutral and already positioned to disburse funds at closing. Whatever you choose, make sure the escrow holder is clearly identified in your contract and that you receive written instructions.
Wire and check safety
Wire fraud is real. Only use wiring instructions you verify by calling a known phone number for the title company or escrow holder. Do not rely on wiring details sent by email links. Use traceable funds and keep copies of confirmations and receipts.
Key timelines to track
Every deal is controlled by the contract, but these are common ranges in Chicago:
- Inspection contingency: about 5 to 10 business days from acceptance.
- Loan or financing contingency: often 21 to 30 days for written loan commitment.
- Appraisal: aligned with loan timelines or stated separately.
- Title review: set period to review the title commitment and object to exceptions.
- Closing date: commonly 30 to 60 days unless negotiated otherwise.
Your deadlines matter. Timely notices during these periods protect your deposit if you need to cancel.
If the deal falls through
What happens to earnest money depends on your contract and whether you act within valid contingencies.
You cancel within a valid contingency
If you terminate during your inspection, financing, appraisal, or title contingency and follow the contract’s notice rules, your earnest money is normally returned to you. Provide all required written notices before deadlines.
You default after contingencies expire
If you fail to close without a valid contractual reason after contingencies lapse, the seller may keep the deposit as liquidated damages if your contract has that clause. Some contracts allow the seller to pursue other remedies through the courts, though that is less common in residential deals.
Seller cancels or cannot perform
If the seller refuses to convey the property or cannot deliver marketable title, you are typically entitled to a refund and may have other remedies according to your contract.
Resolving disputes
If both sides sign a mutual release, the escrow holder can usually release funds quickly. If there is a dispute, escrow will hold the deposit until receiving mutual written instructions or a court order. That process can take weeks to months if contested.
Protect your deposit: buyer checklist
Use this quick checklist to safeguard your funds from offer to closing.
Before depositing
- Confirm the exact deposit deadline and payee in the signed contract.
- Verify the escrow holder identity and get written delivery instructions.
- Use traceable funds and secure a written receipt.
During contingencies
- Calendar all deadlines for inspection, loan, appraisal, and title review.
- Send written notices and requests within the time frames set by your contract.
- Keep records of all communications and documents.
Contract terms to review with your agent or attorney
- Earnest money amount, deposit deadline, and who holds escrow.
- Liquidated damages clause and whether it limits the seller’s remedy to the deposit.
- Dispute resolution provisions and release form requirements.
Safety
- Verify wire instructions by phone using known company numbers.
- Keep every receipt and confirmation.
Smart offer strategies for Old Town
You have more than one way to signal strength. A balanced approach often beats a big check.
- Calibrate your deposit to the property type and price tier. Many Old Town condos are well served by deposits in the 2,500 to 10,000 dollar range, while larger homes may warrant more.
- Pair the deposit with crisp due diligence. Shorter inspection windows, clear appraisal terms, and strong lender communication show you can perform.
- Keep flexibility. If you need a smaller deposit, consider tightening contingency timelines where you are comfortable and prepared to move quickly.
Real-world examples
- Example 1: A buyer deposits 5,000 dollars with the title company within 48 hours of acceptance. During a 7 day inspection period, they find material defects and cancel per contract. The deposit is returned.
- Example 2: A buyer misses the financing contingency deadline and later cannot close. The seller invokes the liquidated damages clause and keeps the earnest money.
- Example 3: Title reveals liens the seller cannot clear. The buyer receives a refund and may pursue additional remedies per the contract.
Buying in Old Town should feel confident and clear. If you want help sizing your deposit, tightening timelines, and structuring contingencies that protect you while keeping your offer competitive, let’s talk. Reach out to Julie Latsko Residential for a tailored plan that fits your goals.
FAQs
How much earnest money do Old Town buyers usually need?
- A common guideline is 1% to 3% of price, with many Old Town condos in the 2,500 to 10,000 dollar range and larger homes often higher.
When is earnest money due in Chicago purchase contracts?
- It is usually due upon acceptance or within 24 to 72 hours, exactly as stated in your signed contract.
Who holds earnest money in Chicago deals?
- Typically a title company, the listing broker’s trust account, or an attorney’s escrow account named in the contract.
Is earnest money refundable if I cancel?
- Yes if you terminate within valid contingencies and follow the contract’s notice requirements; otherwise the seller may keep it per the contract.
How fast do I get my deposit back if a deal falls through?
- With a mutual written release, the refund is usually quick; if there is a dispute, escrow may hold funds until resolution, which can take longer.
