Making an offer on a Southshore home and wondering how much earnest money to put down? In Aurora, the deposit you choose can strengthen your offer and also affect your risk if plans change. This guide explains what earnest money is, how Colorado due diligence fees work, how much is typical, and how to protect your funds through each milestone. Let’s dive in.
What earnest money is
Earnest money is a good-faith deposit you pay after your offer is accepted. It shows the seller you are committed while you complete inspections, financing, appraisal, and title review. If you close, the deposit is usually credited to your down payment or closing costs.
In Colorado practice, many contracts use both earnest money and a Due Diligence Fee (DDF). The DDF is paid directly to the seller for the exclusive right to terminate during the Due Diligence Period. The DDF is typically non-refundable if you terminate, while the earnest money sits in escrow and is returned or released based on the contract’s contingencies and deadlines. Your exact rights depend on the purchase contract and any addenda.
How it works in Aurora
Most Aurora and Arapahoe County transactions name a title company as the escrow holder for earnest money. Some deals use the listing brokerage or an attorney, but title companies are common escrow agents. The contract identifies the escrow holder and sets the deposit deadline, often within 1 to 3 business days of acceptance.
You should receive a written escrow receipt that shows the amount, date, and account details. The funds are held under the escrow instructions and typically applied to your buyer funds at closing. Interest on escrowed earnest money is uncommon unless the contract specifies otherwise.
Your earnest money is not recorded with the county. Only the deed and mortgage are recorded at closing with the Arapahoe County Clerk and Recorder. Title and escrow teams handle those mechanics once you close.
How much to offer
Typical ranges vary by market conditions and price point:
- Calmer or lower-priced segments: fixed amounts such as $1,000 to $5,000 are common.
- Moderate markets: about 1% of the purchase price is a common rule of thumb.
- Competitive seller markets: 1% to 3% or more, and sometimes a larger non-refundable DDF to strengthen the offer.
In Denver-metro neighborhoods like parts of Aurora, stronger deposits and DDFs can help in multiple-offer scenarios. In a more balanced market, smaller amounts are often acceptable. Match your deposit strategy to current Southshore activity, days on market, and inventory.
Contingencies and refunds
Contingencies protect your earnest money when used correctly and on time:
- Due Diligence and inspections: If you terminate within the Due Diligence Period using the contract’s written procedure, your earnest money is typically refundable. The DDF usually remains with the seller.
- Financing contingency: If you cannot obtain financing under the contract terms and terminate properly, earnest money is usually returned.
- Appraisal contingency: If value comes in below price, you may renegotiate, add funds, or terminate as allowed by the contract. Timing and notices control whether your earnest money is refunded.
- Title issues: If the seller cannot cure an unresolvable title defect and you terminate per the contract, your earnest money is typically returned.
Missing deadlines or giving improper notice can put your funds at risk. Use the exact written notices and delivery methods stated in your contract.
Common buyer scenarios
- Scenario A — Terminate during Due Diligence: You paid a $2,000 DDF to the seller and $5,000 earnest money into escrow. An inspection reveals a major foundation issue. You terminate before the deadline and follow the contract notice. Result: DDF stays with the seller, earnest money is returned to you.
- Scenario B — Appraisal low after protections lapse: You allow some contingencies to expire, then the appraisal is low and you cannot cover the gap. Result: You may lose earnest money unless the contract preserves appraisal protection or the seller agrees.
- Scenario C — Buyer breach after contingencies: You remove financing and later cannot close. Result: The seller may claim the earnest money as damages per the contract. Resolution can be negotiated or handled through arbitration.
- Scenario D — Seller breach: Seller cannot deliver marketable title or refuses to close without lawful cause. Result: Your earnest money is returned, and the contract may offer additional remedies.
Buyer checklist
Before you write the offer:
- Ask your agent for Southshore and Aurora comps, days on market, and inventory to set a smart EM and DDF strategy.
- Choose an earnest-money amount that balances competitiveness with acceptable risk.
- Confirm with your lender how appraisal and financing contingencies should be structured.
When you submit the offer:
- Name the escrow holder and include the deposit deadline in the contract.
- If using a DDF, specify the Due Diligence Period length and the DDF amount.
Right after acceptance:
- Deliver earnest money on time and get a written escrow receipt.
- Calendar every deadline: due diligence, appraisal, loan, title, and closing.
- Schedule inspections and review title as soon as possible.
If problems arise:
- Send required written notices before the deadline using the method in the contract.
- Keep copies of all emails, notices, and receipts.
Before and at closing:
- Confirm how the earnest money will credit on the settlement statement.
- Review the final figures with your agent and escrow officer.
Avoid disputes and protect your funds
Escrow agents follow written instructions. They will not release funds without written agreement from both parties, a court order, or an arbitration award. If there is a disagreement, your agent can help open an escrow dispute and guide next steps. Many Colorado contracts include mediation or arbitration provisions to resolve earnest-money conflicts.
The most common reason buyers lose earnest money is missing a deadline or failing to deliver the correct written notice. Track dates carefully, use the contract forms your agent provides, and ask questions early if anything looks off.
Closing day and your deposit
If you close, your earnest money is applied to your down payment or closing costs. The settlement statement will show the credit. Your title company will handle recording of the deed and any loan documents with Arapahoe County.
Ready to move in Southshore?
When you understand earnest money and due diligence, you make cleaner, safer offers. If you want local guidance tailored to Southshore and Aurora, our family-led team is here to help you weigh competitiveness and risk at every step. Reach out to Gerlock Homes for a no-pressure consultation.
FAQs
What is earnest money in Colorado real estate?
- It is a good-faith deposit that shows commitment, held in escrow and typically credited to your buyer funds at closing.
How is a Due Diligence Fee different from earnest money?
- The DDF is paid to the seller for the right to terminate during the Due Diligence Period and is usually non-refundable, while earnest money is escrowed and tied to contingencies.
Who holds earnest money in Aurora transactions?
- A title company commonly holds the funds as escrow agent, though some deals use the listing brokerage or an attorney.
How much earnest money should Southshore buyers expect?
- Ranges vary by market: about $1,000 to $5,000 in calmer segments, around 1% in moderate markets, and 1% to 3% or more in competitive scenarios.
When do I get my earnest money back if I terminate?
- If you terminate within a valid contingency and meet notice deadlines, your earnest money is typically refunded, but the DDF usually stays with the seller.
What happens if the seller refuses to release my earnest money?
- Escrow will hold the funds until both parties agree in writing, or an arbitrator or court issues an order, as directed by the contract and escrow instructions.
