Earnest money is a deposit — not an additional payment on top of the purchase price. Specifically, it is credited toward the buyer’s funds due at closing, reducing the cash needed on closing day. Furthermore, the amount is negotiated between buyer and seller and written into the purchase agreement. In Indiana, there is no legally mandated minimum earnest money amount — however, too small a deposit can signal weak buyer commitment in a competitive market like Monticello where homes average approximately 14 days on market.

Additionally, sellers in a fast-moving market may counter with a request for a higher earnest money amount to demonstrate the buyer’s seriousness. Moreover, earnest money is distinct from the down payment — the down payment is the equity portion of the purchase price paid at closing, while earnest money is simply a portion of that payment made earlier to secure the contract.

In Indiana, earnest money is held in escrow — typically by the title company handling the transaction or by the buyer’s broker’s escrow account. Specifically, the funds are not released to the seller during the transaction; they sit in a neutral account until closing or termination. Furthermore, the escrow holder disburses the funds according to the terms of the purchase agreement and any mutual release signed by both parties.

Moreover, buyers should confirm who holds the earnest money and request a receipt confirming the deposit was received and placed in escrow. Specifically, the purchase agreement specifies when earnest money must be deposited — typically within one to three business days of accepted offer. Additionally, buyers should be prepared to wire or deliver funds promptly to avoid any dispute about timely deposit.

Earnest money is generally at risk when a buyer terminates a contract without a valid contingency reason after the applicable contingency periods have expired. Specifically, if the inspection contingency period has passed and the buyer terminates without a qualifying reason, the seller may be entitled to the earnest money as liquidated damages. Furthermore, if the buyer simply changes their mind after all deadlines have passed, the earnest money is typically forfeited.

Additionally, buyers who waive contingencies to strengthen an offer in competitive markets should understand this risk clearly before doing so. Specifically, a contingency waiver means that reason for termination no longer protects the deposit. For more on how contingencies work in Monticello offers, see the making an offer guide.

At closing in Indiana, earnest money is credited toward the buyer’s total funds due. Specifically, if a buyer puts down 5 percent on a $257,500 home, that is $12,875 total down payment. If $5,000 earnest money was deposited, the buyer brings $7,875 in additional funds at closing plus their share of closing costs.

Furthermore, the closing disclosure received by buyers before closing day shows exactly how earnest money applies to the final settlement. For more on what buyers pay at closing in Indiana, see the Indiana closing costs guide.

Frequently Asked Questions — Earnest Money in Indiana

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