Earnest Money in Silicon Valley Explained

Buying in Sunnyvale moves fast. When you write an offer, your earnest money deposit is one of the first signals that you are serious. In Silicon Valley, prices are high and timelines are tight, so it pays to understand how deposits work and how to protect your funds. In this guide, you will learn what earnest money is, typical amounts, when it is refundable, and how to craft a strong offer without taking on unnecessary risk. Let’s dive in.

What earnest money means in California

Earnest money is a good-faith deposit you make after a seller accepts your offer. It shows commitment and is applied to your down payment and closing costs at closing.

In California, a neutral third party known as an escrow or title company holds the deposit in a trust account. Escrow companies are regulated and follow strict trust account rules. The California Association of Realtors Residential Purchase Agreement sets the deposit amount, when you must deliver it, and when it can be refunded or forfeited.

The deposit does not transfer ownership. If the sale closes, it is credited toward your purchase. If you breach the contract after removing protections, the seller may be entitled to keep some or all of the deposit, according to the contract.

Deposit sizes in Sunnyvale

A common starting range is 1 to 3 percent of the purchase price. In competitive parts of Silicon Valley, buyers sometimes offer more to strengthen an offer. Since home prices are high, even small percentages equal large dollar amounts.

Here are simple examples to help you plan:

• On a $1,000,000 home: 1 percent is $10,000, 2 percent is $20,000, 3 percent is $30,000.
• On a $1,500,000 home: 1 percent is $15,000, 2 percent is $30,000, 3 percent is $45,000.
• On a $2,000,000 home: 1 percent is $20,000, 2 percent is $40,000, 3 percent is $60,000.

In multiple-offer situations, you may see higher deposits or other terms that make an offer look strong. Always match the deposit to your funding strength and the risk you are willing to take.

Timelines, escrow, and refunds

Your contract will state when you must deliver the deposit to escrow. Many offers call for delivery within 1 to 3 business days of acceptance. Once escrow receives the funds, they issue a receipt and hold the money in a trust account. Some accounts pay interest depending on escrow instructions.

Your deposit is protected by contingencies that you include in your offer. Contingencies protect your deposit as long as you follow the notice rules and timelines in the contract.

Common contingencies include:

• Inspection contingency. You can perform inspections and cancel during this period if needed.
• Loan contingency. If your loan is not approved within the timeframe, you can cancel and typically recover your deposit.
• Appraisal contingency. If the appraisal comes in low and you cannot or do not want to cover the gap, you can usually cancel within the deadline.

Your protection ends if you remove contingencies or if deadlines pass without action. After that point, canceling can put your deposit at risk.

When deposits are refundable vs. forfeited

Your deposit is usually refundable if you cancel within an active contingency period and give proper written notice by the deadline stated in the contract. Keep records of notices and dates.

Your deposit can be forfeited if you breach the contract after removing contingencies or miss a deadline. Examples include removing the loan contingency and then failing to close, or canceling without a valid contractual reason.

If there is a dispute, escrow will typically hold the funds until you and the seller agree in writing or until the contract’s dispute process or a court decides what happens next.

Offer strategies that win without undue risk

You can make your offer more attractive while still protecting your deposit. Consider these steps, from lower risk to higher risk:

• Increase the deposit slightly. A larger deposit can signal confidence without removing protections.
• Shorten contingency periods to realistic timelines. For example, target 7 to 10 days for inspections if your inspector and lender can meet those dates.
• Accelerate the close date if your lender can perform. Faster closings are appealing to many sellers.
• Provide strong proof of funds and a solid lender pre-approval. This reduces concerns about financing.
• Use limited appraisal-gap language. You can agree to cover a set amount above the appraisal rather than fully waiving the appraisal contingency.
• Consider an escalation clause if allowed. Draft it carefully so it fits local norms and your budget.
• Structure deposits in stages. For example, deliver a portion within one business day and the balance within three days to show commitment.

Higher risk options include waiving inspection or loan contingencies or agreeing that some or all of the deposit becomes non-refundable at a milestone. These tactics can help in fierce competition, but they increase the chance of losing your deposit. Get experienced guidance before using them.

Example offer structures

• Balanced approach. 2 percent deposit, inspection contingency set for 10 days, loan contingency in place with a firm lender commitment date, and appraisal-gap coverage up to a modest dollar cap.
• Aggressive approach. 5 percent deposit, inspection contingency waived, appraisal protection waived. This can compete in multiple offers but carries a high risk to your deposit if issues arise.

Smart timing tips for Sunnyvale

• Confirm the exact delivery timeline for your deposit in the contract. Do not assume.
• Schedule inspectors before you write the offer if possible. Short windows require fast bookings.
• Ask your lender how quickly they can issue an underwriting commitment. Align your loan contingency with what they can deliver.
• Clarify whether the escrow account pays interest and who receives it in the escrow instructions.

What happens in a dispute

If you and the seller disagree about the deposit, escrow will usually hold the funds until it receives matching written instructions, arbitration results, or a court order. The purchase agreement and escrow instructions govern this process. This is often called an interpleader or similar dispute process.

Quick checklist before you write

• Confirm your deposit amount and how quickly you can deliver it.
• Map out contingency periods your lender and inspectors can meet.
• Decide on any appraisal-gap coverage you are comfortable with.
• Gather proof of funds and a current pre-approval letter.
• Review dispute resolution and contingency removal steps in the contract.
• Align with a local agent who knows Sunnyvale norms and can coordinate escrow.

Buying in Sunnyvale rewards preparation. With the right deposit amount, smart timelines, and carefully drafted contingencies, you can compete with confidence and keep your funds protected. If you want a clear plan tailored to your goals, reach out to Kim Adams for local, hands-on guidance from offer to closing.

FAQs

How much earnest money should I put down in Sunnyvale?

• Start with 1 to 3 percent as a baseline and adjust based on price, competition, and your financing strength; pair your deposit with proof of funds and a strong pre-approval.

Do I get my deposit back if I cancel during inspections?

• Usually yes if your inspection contingency is active and you cancel within the deadline using the required written notice outlined in your contract.

What if my lender does not approve my loan on time?

• If your loan contingency is in place and you notify the seller within the contract timeline, your deposit is typically refundable; if you removed it, the deposit is at risk.

Can the seller keep my deposit and still sell to someone else?

• If you breach after removing contingencies, the seller may keep the deposit as allowed by the contract and still move forward with a sale to another buyer.

Who holds my deposit and how do I pay it?

• You typically make the deposit payable to the escrow company’s trust account; your agent will provide the exact payee and delivery instructions in writing.

Do escrow accounts pay interest on earnest money?

• Some do and some do not; ask the escrow company and check your escrow instructions to see if interest is paid and to whom.