Ever heard someone say, “Put some skin in the game,” when making an offer? In South Portland and across Cumberland County, that usually means earnest money. It can feel confusing if you are buying or selling your first home, and it is normal to wonder how much you should offer and when you can get it back. In this guide, you will learn exactly how earnest money works in Maine, typical amounts, what protects your deposit, and how to avoid common pitfalls. Let’s dive in.
Earnest money explained
Earnest money is a good-faith deposit you make at or shortly after mutual acceptance of a purchase and sale agreement. It shows the seller you are serious and gives them partial protection if you fail to perform under the contract. The money is held in escrow and is typically credited toward your down payment or closing costs at closing.
Contracts in Maine generally treat earnest money as refundable only under specific contingencies. If you cancel for reasons outside those protections, you risk forfeiting the deposit.
Local practice in South Portland
South Portland and greater Cumberland County follow common New England customs for deposits, escrow, and closing support by attorneys. The exact requirements live in your purchase agreement, but several practices are typical in the area.
How much should you offer?
- For many homes, buyers offer $1,000 to 3% of the purchase price.
- In more competitive situations or on higher-priced homes, 3% to 5% is common.
- For lower-priced properties, buyers sometimes choose a flat amount like $1,000 to $5,000.
Your goal is to stay proportional to the market. Bigger deposits can strengthen an offer, but you should not overexpose funds beyond what the market demands.
Who holds the funds?
Your contract should name the escrow holder. In Cumberland County, earnest money is commonly held by:
- A listing broker or buyer’s broker in a trust/escrow account
- An attorney’s escrow account, especially where attorneys facilitate closings
- A title, closing, or settlement company if one is engaged
Always get written escrow instructions and a receipt once funds are deposited.
When do you deposit?
Most agreements require delivery within 24 to 72 hours of mutual acceptance. If you are wiring funds, request verified instructions early to prevent delays and reduce fraud risk.
Contingencies that protect your deposit
Contingencies define when your deposit is refundable. Common protections include:
- Inspection: You may cancel within the agreed inspection period if you are not satisfied with the results.
- Financing: Your purchase depends on obtaining mortgage approval within a set timeline.
- Appraisal: You have the right to cancel or renegotiate if the property does not appraise at or above the purchase price, depending on the clause.
- Title or survey: Issues that cannot be cured can allow you to exit.
- Sale of current home: If applicable, you may be protected if your home does not sell in time.
Clear deadlines are key. If you miss a deadline, you can lose the protection and put your deposit at risk.
When each party may get the money
When you keep your deposit
If you cancel within an active contingency and follow the contract’s steps, the escrow holder typically returns your deposit. Examples include terminating during the inspection period or failing to secure financing despite good-faith efforts under the financing contingency.
When the seller may keep it
If you breach after contingencies expire, the seller may be entitled to your deposit as liquidated damages if your contract includes such a clause. Liquidated damages aim to provide a predictable remedy that is reasonable, not punitive. If you cancel for reasons outside the contract, your deposit is at risk.
If there is a dispute
Most contracts describe how to release funds from escrow. Many require a mutual written release or allow the escrow holder to retain funds until the parties agree, pursue mediation or arbitration, or obtain a court order. Brokers and escrow holders follow specific procedures when client funds are in dispute.
Safe handling of escrow and wires
Wire fraud is a known risk in real estate transactions. Protect yourself by:
- Verifying wire instructions using a trusted phone number you confirm independently
- Confirming the escrow account name and holder listed in your contract
- Obtaining a written receipt and deposit confirmation from the escrow holder
If you prefer, use a certified check delivered per the contract’s instructions to reduce wire risk.
Buyer tips for Cumberland County
- Match the market: Offer a deposit that fits local norms and the property type. In competitive scenarios, consider the high end of typical ranges.
- Lock in timelines: Put inspection, financing, and appraisal deadlines in writing. Know your last day to cancel under each contingency.
- Name the escrow holder: Include the escrow agent’s name and contact details in the contract.
- Require access: Ensure the seller must provide access for inspections and appraisals on a clear schedule.
- Document everything: Get a deposit receipt and keep copies of all addenda and notices.
- Avoid hasty wires: Verify instructions by phone and do not rely on email alone.
Seller strategies that protect you
- Set a reasonable deposit: Require an amount that shows commitment and discourages weak offers.
- Use clear remedies: If you want predictability, include a reasonable liquidated damages clause for buyer default.
- Clarify release steps: Confirm who holds the funds and the process to release them after a default or mutual termination.
From deposit to closing in Maine
In Maine and much of New England, attorneys frequently handle closings and may hold earnest money in escrow. Title companies can also be involved, depending on the deal. At closing, the deposit is usually credited to the buyer’s cash to close. If the transaction terminates under a valid contingency, the escrow holder typically returns the deposit according to the release terms in the agreement.
A simple earnest money timeline
- Offer and acceptance: You reach mutual agreement with the seller.
- Deposit deadline: You deliver earnest money, often within 24 to 72 business hours.
- Contingency periods: You complete inspections, apply for financing, and obtain appraisal results by stated deadlines.
- Release or credit: If you terminate within a contingency, funds are returned per contract terms. If you close, the deposit is credited toward your buyer funds.
When questions come up, lean on your contract and your local team. The details matter: who holds the funds, how each contingency is written, and how deadlines are managed.
Ready to buy or sell in South Portland or anywhere in Cumberland County with a clear plan for earnest money, timelines, and outcomes? Reach out to Adam Parent for local guidance and a smooth, confident path to closing.
FAQs
How much earnest money is typical in South Portland?
- Many buyers offer $1,000 to 3% of the price, with 3% to 5% more common in competitive situations or higher-priced homes.
Who usually holds earnest money in Maine transactions?
- Funds are commonly held by a listing or buyer’s broker, an attorney’s escrow account, or a title or settlement company named in your contract.
When do I have to pay the deposit after my offer is accepted?
- Most contracts require delivery within 24 to 72 hours of mutual acceptance, so plan ahead for a check or verified wire.
Will my earnest money count toward my down payment?
- Yes. At closing, the escrowed deposit is typically credited to your down payment or closing costs.
Can I get my deposit back after a bad inspection?
- If your contract has an inspection contingency and you cancel within that period following the required steps, you usually receive a refund.
What happens if my mortgage is denied?
- If you included a financing contingency and acted in good faith within the timeline, your deposit is generally refundable under the contract terms.
Can the seller keep my earnest money if I back out late?
- If you default after contingencies expire and your contract includes liquidated damages, the seller may be allowed to keep the deposit as reasonable damages.
How are escrow disputes resolved in Cumberland County?
- Contracts often require a mutual written release or a dispute process; escrow holders may retain funds until there is an agreement, mediation, arbitration, or a court order.
