Putting money down before you even inspect a home can feel risky. That first deposit is called earnest money, and it shows a seller that you are serious about buying. When you understand how it works in Southern Indiana, you can make smart offers and protect your cash. In this guide, you will learn typical amounts in New Albany and Floyd County, timelines, contingencies, refunds, and how your deposit is applied at closing. Let’s dive in.
What earnest money means in Indiana
Earnest money is a good faith deposit you place after a seller accepts your offer. It is held in escrow and later credited to your down payment or closing costs. The specific rules for your deposit come from the purchase agreement you sign.
In Indiana, escrow can be handled by a title company, a closing attorney, or a brokerage trust account. Your contract will name the escrow holder and set the amount, the deadline to deliver funds, and the rules for release. If you cancel within a valid contingency window, you usually receive a refund. If you default after removing contingencies, the seller may keep the deposit under a liquidated damages clause, or pursue other remedies based on the contract.
Typical amounts in New Albany and Floyd County
Local practice in Southern Indiana follows clear ranges. Your price point and market conditions will guide your offer.
- Entry-level homes under $200,000: commonly $1,000 to $2,500
- Mid-range homes $200,000 to $400,000: commonly $2,500 to $5,000
- Higher-priced homes: often about 1% of the price; in competitive markets, up to 1 to 2 percent
Your deposit can also shift based on competition, how strong your financing looks, and seller risk. Bigger deposits can signal strength, but you should match your number to your comfort level and the contract protections in place.
When you pay and how it is delivered
Most offers in the area require you to deliver earnest money within 24 to 72 hours after acceptance. Some sellers will accept a check with the offer and allow it to clear later. You can use a certified check, a personal check, or a wire transfer.
Wire instructions are a prime target for fraud. Protect yourself by calling the title or escrow company using a verified phone number before sending any funds. Do not rely on email-only instructions or any unexpected change in wiring details.
Contingencies that protect your deposit
Your contract gives you specific windows to review the home and your financing. If you cancel within those windows as the contract allows, your deposit is typically refundable.
- Inspection contingency: often 7 to 10 days. You can cancel or request repairs based on findings.
- Financing contingency: commonly 21 to 30 days. If your loan is denied within the stated period, you can cancel.
- Appraisal contingency: if the appraisal comes in low and there is no agreement on a fix, you can cancel under this clause.
- Title contingency: you can cancel if title defects are not cured per the contract.
- Sale-of-home contingency: gives you time to sell your current home. It is protective for you but may be less attractive to sellers.
Refundable vs forfeited: what to expect
Your deposit is refundable if you terminate properly and on time under a contingency, if the seller breaches the contract, or if title issues are not resolved. Keep proof of delivery and follow the notice methods in the contract.
You may forfeit your deposit if you default after removing or waiving contingencies and the contract allows the seller to keep the funds as liquidated damages. Disputes can arise, so clear documentation and meeting every deadline matter.
How earnest money is applied at closing
Here is the typical money flow from contract to closing:
- You deposit earnest money with the named escrow holder.
- The funds remain in escrow until closing or earlier release per the contract.
- At closing, the deposit is credited toward your down payment and closing costs.
- If you cancel within a valid contingency, the escrow holder returns funds according to the contract.
Real-life examples
Example A: Typical financed purchase
- Price: $250,000
- Earnest money: $2,500 (about 1 percent)
- Down payment: 5 percent or $12,500
- At closing: Your $2,500 deposit is credited. You bring the remaining $10,000 plus closing costs.
Example B: Cancel during inspection period
- Same numbers as above, but a major foundation issue appears. You cancel within the inspection window per the contract. Your $2,500 is returned.
Example C: Default after removing contingencies
- You waive inspection, then walk away without a contractual reason. The seller may keep the $2,500 as liquidated damages if allowed by the agreement.
Cross-river buyers from Kentucky
If you live in Kentucky and are buying in Southern Indiana, the process is familiar. Your financing, appraisal, title work, and closing can be handled by Indiana lenders and title companies. Two helpful reminders:
- Use an agent licensed in Indiana or confirm a dual-license arrangement.
- Confirm your title and closing agent is set up for Indiana transactions and local requirements.
Earnest money amounts do not usually change just because you are crossing the river. Focus on clear contract terms and local escrow procedures.
Quick buyer checklist
Before you deposit earnest money, run through this simple list:
- Confirm the deposit amount and the delivery deadline in your signed purchase agreement.
- Confirm the named escrow holder and how funds will be released.
- Get written escrow instructions and a receipt after you deposit.
- Note every contingency deadline and set reminders.
- Ask how interest on escrowed funds is handled, if applicable.
- If wiring funds, verify instructions by phone using a trusted number.
Common mistakes to avoid
- Offering a large deposit without matching protections or realistic timelines.
- Missing an inspection or financing deadline by even one day.
- Waiving contingencies you still need in order to feel safe moving forward.
- Sending a wire without calling the title company to confirm details.
- Assuming the escrow holder or seller knows your intent without written notice.
Local timing norms to keep in mind
If you plan your offer with these windows in mind, you will stay on track:
- Earnest money due: 24 to 72 hours after acceptance
- Inspection period: typically 7 to 10 days
- Financing approval: typically 21 to 30 days
- Closing: often 30 to 45 days with financing, faster with cash
Final thoughts
Earnest money is a simple concept with important fine print. In New Albany and across Floyd County, you can expect clear ranges, standard timelines, and escrow processes that protect both sides. The key is to match your deposit to the market, lock in fair contingency periods, and meet every deadline with written notices.
If you want step-by-step support from offer to closing, connect with a local guide who knows Southern Indiana and cross-river details. Reach out to Weston Faulkner for practical, responsive help tailored to your goals.
FAQs
How much earnest money do buyers in New Albany usually pay?
- For many single-family homes, buyers commonly put $1,000 to $5,000 down. Higher-priced homes often use about 1 percent of the purchase price.
When is earnest money due after my offer is accepted in Floyd County?
- Most contracts require delivery within 24 to 72 hours of acceptance. Your exact deadline is in the purchase agreement.
What contingencies help me get my deposit back if I cancel?
- Inspection, financing, appraisal, and title contingencies protect you if you cancel within the stated timelines and methods in your contract.
What happens to my earnest money at closing in Southern Indiana?
- The deposit is credited to your down payment and/or closing costs, reducing your final cash to close.
Can a seller keep my earnest money if I change my mind?
- If you default after removing or waiving contingencies, the seller may keep the deposit as liquidated damages if the contract allows.
How can I avoid wire fraud when sending a deposit?
- Call the escrow or title company on a trusted number to confirm wiring instructions. Do not act on unexpected email changes.
I live in Kentucky. Does cross-river buying change my deposit?
- Not usually. Use an Indiana-licensed agent, confirm your Indiana title company, and follow the same earnest money rules set in your purchase agreement.
