Thinking about making an offer in Salem but not sure how earnest money works? You’re not alone. This small but important deposit can help your offer stand out and also protect you when things don’t go as planned. In the next few minutes, you’ll learn what earnest money is, how much to expect in Salem and the North Shore, when it’s due, and the safeguards that keep your funds safe. Let’s dive in.
Earnest money basics in Salem
Earnest money, sometimes called a good-faith deposit, shows the seller you’re serious about buying. The funds are typically applied to your down payment or closing costs at closing. In Salem and nearby North Shore markets with strong demand and limited inventory, sellers often expect solid deposits that match the competitiveness of the offer. There is no set percentage required by Massachusetts law, so the amount is negotiable and defined in your contract.
Typical deposit amounts and timing
In Massachusetts, typical ranges vary by price point and competitiveness:
- Modest offers or lower-priced homes: about $1,000 to $5,000
- Many single-family homes: often 1% to 3% of the purchase price
- Competitive or multiple-offer situations: 3% to 5% or higher, or a larger flat dollar amount like $10,000+
When your deposit is due often depends on how the deal is structured:
- At offer: You may submit a deposit with the offer or within 24 to 72 hours of acceptance.
- At Purchase and Sale: Some buyers make a smaller initial deposit with the offer and increase it when the Purchase and Sale agreement is signed.
- Deadlines matter: Your offer and Purchase and Sale should clearly state the deposit amount, the timing, and the escrow holder.
Who holds your deposit
In Salem and across the North Shore, deposits are typically held in a broker trust account or an attorney’s escrow account. Brokers and attorneys must keep client funds separate and follow written escrow instructions. Your contract should name the escrow agent, where funds will be held, and how they will be handled and released. Always get a written receipt for any funds you deliver.
How contingencies protect you
Contingencies are conditions that must be met for the deal to move forward. If you cancel within a valid contingency period, your deposit is generally refundable.
Common contingencies include:
- Financing: If you cannot secure your mortgage by the commitment deadline, you may cancel under the financing contingency.
- Home inspection: You can inspect the property and negotiate or cancel within the inspection period.
- Appraisal: If the appraisal comes in low, you may use this contingency to renegotiate or walk away per the contract terms.
- Title and municipal compliance: If the seller cannot deliver clear title or required certifications, you can seek a remedy noted in the contract.
- Sale of buyer’s home: This protects your timeline but can make your offer less competitive.
Missing a contingency deadline or waiving contingencies increases your risk. Once contingencies are gone, backing out for non-contract reasons may put your deposit at risk.
What if the deal falls through
Deals can fall apart for many reasons. Your contract will outline what happens next and how your deposit is handled.
- If you cancel within a valid contingency: You are typically entitled to a full refund of your deposit.
- If you cancel after contingencies are waived or deadlines pass: You may forfeit your deposit. Some contracts use a liquidated damages clause that allows the seller to keep the deposit.
- If the seller breaches: You may be entitled to your deposit back and could have additional remedies depending on the contract language.
If there’s a dispute about releasing funds, the escrow holder usually keeps the deposit in escrow until both parties agree in writing or a mediator, arbitrator, or court decides. Clear instructions in your Purchase and Sale help prevent delays.
Buyer safeguards and best practices
Protect your funds with a few simple steps:
- Confirm escrow details in writing. Name the escrow holder and account in your offer and Purchase and Sale.
- Use traceable delivery. Follow written wiring instructions or use a cashier’s check, and keep proof of delivery.
- Get a receipt. You should receive a written receipt noting the amount, date, and property address.
- Guard against wire fraud. Verify wiring instructions by calling the escrow holder using a known phone number, not one from an email.
- Consider attorney review. In Massachusetts, it’s common for attorneys to review Purchase and Sale agreements and escrow clauses.
Salem buyer checklist
Use this quick checklist to stay organized:
- Decide on a deposit that matches your strategy and risk tolerance.
- Set clear contingency deadlines for inspection, financing, and appraisal in writing.
- Name the escrow agent and account, and confirm deposit delivery deadlines.
- Keep copies of checks, wire confirmations, and receipts.
- Discuss dispute resolution terms in the Purchase and Sale with your attorney or agent.
- Watch for wire-fraud red flags and always verify instructions by phone.
Strategy in competitive offers
A larger deposit can strengthen your offer in Salem’s competitive market, but it also increases your risk if you waive protections. Work with your agent to strike the right balance. You can also improve your position with non-monetary terms such as a flexible closing date, a clean inspection timeline, or an escalation clause. Only waive or shorten contingencies if you fully understand the risk and have a clear plan.
Next steps
With the right plan, your earnest money supports a confident, competitive offer while keeping your interests protected. If you want help choosing the right deposit amount, setting timelines, and crafting a smart strategy for Salem and the North Shore, reach out to the experts who do this every day. Connect with The North Shore and More Team at eXp for a friendly, pressure-free strategy session.
FAQs
Is earnest money refundable in Massachusetts?
- It depends on your contract. If you cancel within a valid contingency period, your deposit is usually refundable. After waiving contingencies or missing deadlines, you may forfeit it.
How much earnest money should I offer in Salem?
- Many buyers offer 1% to 3% of the purchase price, with higher amounts in competitive situations. Choose an amount that supports your strategy without risking more than you are comfortable with.
When do I have to deliver my deposit?
- Often with the offer or within 24 to 72 hours of acceptance, and sometimes increased at the Purchase and Sale signing. Your contract will set exact deadlines.
Who holds the deposit in Salem and the North Shore?
- Typically a broker’s trust account or an attorney’s escrow account. Your contract should name the escrow holder and provide release instructions.
What happens if the seller breaches the agreement?
- You may be entitled to a return of your deposit and could have additional remedies under the contract. The exact outcome depends on the Purchase and Sale language.
Can the seller just keep my deposit if I back out?
- Not automatically. The contract controls. If you back out after contingencies are waived, the seller may keep the deposit under a liquidated damages clause or pursue other remedies.
