Buying in Chicago and wondering how earnest money really works? You’re not alone. This small but important deposit can shape how strong your offer looks and what happens if a deal falls apart. In this guide, you’ll learn typical deposit amounts in Chicago, when funds are refundable, key timelines, and how to protect your money from start to close. Let’s dive in.
What earnest money is
Earnest money is a good‑faith deposit you include with a signed purchase contract. It shows the seller you’re serious. If the sale closes, the money is credited to your cash to close.
Illinois contracts commonly include a line for the earnest‑money amount, where it’s held, when you must deliver it, and what happens if either party defaults or cancels. The contract terms control how the deposit is handled.
Who holds your deposit
In Chicago‑area transactions, your earnest money is typically held by a neutral third party. It is most often one of the following:
- Listing broker’s escrow or trust account
- Title or closing company
- Attorney escrow account (less common)
The contract should name the escrow holder and include delivery instructions. The holder safeguards your funds and releases them only according to the contract or written agreement by both parties.
Typical amounts in Chicago
Earnest‑money amounts vary by price point, competition, and seller expectations. Here are common ranges seen across Chicago and Cook County:
- Lower‑priced homes and many condo resales: about $1,000 to $5,000
- Median single‑family or townhome sales: about $3,000 to $15,000
- Higher‑priced or highly competitive situations: a percentage, often 1% to 3% of the price
Amounts are not set by law. Your agent will help you right‑size your deposit based on the property, neighborhood competition, and your overall strategy.
What drives the amount
- Competition in the neighborhood and multiple‑offer pressure
- Purchase price and seller preferences
- Your contingency plan and risk tolerance
- Any lender or assistance‑program limits on cash available
Deadlines and contingencies
Most Chicago‑area contracts require you to deliver earnest money shortly after acceptance, often within 24 to 72 hours or a set number of business days. Your exact deadline is in your contract.
Common contingencies include inspection, financing, appraisal, and title review. While a contingency is active, you can usually cancel for that reason and request a refund if you follow the notice rules in the contract.
When it’s refundable
Your earnest money is typically refundable when:
- You cancel within an active inspection, financing, appraisal, or title contingency and follow the contract’s notice steps
- There is a title defect or seller issue that allows termination under the contract
- Both parties sign a mutual written release to end the deal
Always deliver written notices on time and keep proof of delivery to preserve your refund rights.
When it’s at risk
Your deposit commonly becomes at risk when you remove contingencies. If you later default without a contract‑permitted reason, the seller may be entitled to keep your deposit, depending on the contract. In some cases, disputes go to negotiation, mediation, arbitration, or court before funds are released.
The key point: “Non‑refundable” is a contractual status. Read your contract carefully and consult your team before waiving protections.
Escrow, disbursement, disputes
Escrow holders have duties to keep funds in a trust account and follow written instructions. They disburse money when:
- The deal closes and closing instructions authorize release
- Both parties provide matching written directions
- A mediation, arbitration, or court order directs release
If there’s a dispute, the escrow holder usually keeps the deposit until there’s a mutual release or formal decision. Some contracts require mediation or arbitration before litigation.
How to avoid wire fraud
Wire‑fraud attempts targeting earnest money are common. Protect yourself with these steps:
- Verify wire instructions by calling the title or escrow company using a trusted, independently verified phone number
- Do not rely on email‑only instructions or phone numbers in email signatures
- Consider using a cashier’s check if permitted by the escrow holder
- Get a receipt after your deposit is delivered
Buyer checklist
Use this quick plan to stay on track and protect your funds:
Before you offer
- Discuss a smart earnest‑money amount with your agent based on the home and competition
- Confirm who will hold the funds and how you will deliver them
- Prepare proof of funds if the seller requests it
When you write the offer
- State the earnest‑money amount and delivery deadline in the contract
- Set clear contingency timelines for inspection, loan commitment, and appraisal
- Confirm how the deposit will be credited at closing and what happens in a default
After acceptance
- Deliver the deposit on time and get a written receipt
- Track contingency deadlines in your calendar and send notices on time
- Keep written records of any amendments or contingency removals
Closing
- Expect your earnest money to be credited toward your cash to close
- If the deal ends for a permitted reason, make sure the proper release is signed so the escrow holder can return funds
Chicago‑specific notes
- Neighborhood norms vary. Across the city, deposit customs can differ by area and competitiveness. In hot neighborhoods, sellers may expect larger deposits and faster timelines.
- Local costs matter. Chicago and Cook County transfer taxes and recording fees affect your final cash to close. Coordinate with your title company to understand the full amount you will need on settlement day.
- Who you work with. In Illinois practice, title companies often handle escrow and closing, and many buyers involve an attorney for contract review. Local, reputable partners help ensure funds are handled correctly.
Common pitfalls to avoid
- Leaving escrow details vague in the contract
- Missing the deposit delivery deadline
- Sending late or improper contingency notices
- Assuming refunds are automatic after removing contingencies
- Following email‑only wire instructions without verifying by phone
Examples you can relate to
- Inspection window: You deposit $10,000, complete inspections within 7 days, and cancel within the inspection period. Your funds are typically returned under the contract.
- Financing contingency: You apply promptly but cannot secure loan approval within the financing period. If you provide timely notice, the deposit is generally refundable.
- After removing contingencies: You waive inspection and financing, then later back out. Your earnest money may be forfeited, subject to the contract and any dispute process.
Final thoughts and next steps
Earnest money is a small piece of the transaction that carries real weight. Choose the right amount, meet deadlines, use contingencies wisely, and verify every transfer of funds. With a clear plan and the right team, you can compete confidently and protect your deposit from offer to close.
Have questions about your earnest‑money strategy or timing across Chicago and Cook County? Connect with Alejandro Trujillo at RE/MAX NEXT for clear, local guidance. Prefer to start online? Get Your Instant Home Valuation.
FAQs
How much earnest money do Chicago buyers usually pay?
- Typical ranges run from $1,000 to $5,000 for many condos, $3,000 to $15,000 for median single‑family homes, and about 1% to 3% of price in more competitive cases.
How fast do I have to deposit earnest money in Chicago?
- Many contracts require delivery within 24 to 72 hours or a set number of business days after acceptance; your exact deadline is in the contract.
When is earnest money refundable if I cancel?
- It’s usually refundable if you cancel within an active contingency period and follow the contract’s notice rules, or if both parties sign a mutual release.
What happens if the seller and buyer disagree about the deposit?
- The escrow holder typically keeps funds until there is a mutual written release or a mediation, arbitration, or court order directing disbursement.
Can the seller keep my earnest money automatically if I back out?
- Not always; it depends on the contract and circumstances, and disputes may need mediation, arbitration, or court to resolve.
How can I avoid wire fraud when sending my deposit?
- Call the title or escrow company using a verified phone number to confirm wiring details, and consider a cashier’s check if permitted.
Does earnest money count toward my closing funds in Cook County?
- Yes. If the deal closes, your earnest money is typically credited to your cash to close along with other funds at settlement.
