Buying in Franklin and wondering how earnest money works? You are not alone. This small but important deposit can strengthen your offer and protect you when it is used correctly. In this guide, you will learn how much buyers in Williamson County typically put down, who holds the funds, what contingencies protect you, and what happens if a deal falls apart. Let’s dive in.
Earnest money basics in Franklin
Earnest money is a good‑faith deposit you include with an offer to show you are serious. If the sale closes, it is credited to your cash to close on the settlement statement. In a competitive area like Williamson County, a solid deposit can help your offer stand out while your contract contingencies protect you.
The deposit also gives the seller some security if a buyer breaches the contract. Your rights and risks come from the contract itself, so pay close attention to deadlines and notices.
Who holds your deposit
In Tennessee, earnest money is usually held by a neutral third party, often a title or escrow company, or a closing attorney. Some brokerages hold smaller deposits in a brokerage escrow account as allowed by state rules. For larger deposits, using a neutral title or escrow company is common and helps avoid conflicts.
Most purchase agreements set a firm deadline to deliver the funds after both parties sign the contract. You will often see a 24 to 72 hour window, but follow the exact deadline in your agreement. Always get a written receipt that shows the amount, date received, the escrow holder, and the contract reference.
If the sale closes, the escrow holder applies the deposit to your down payment or closing costs at settlement.
How much to offer
There is no fixed rule. Many buyers offer about 1 to 3 percent of the purchase price. In competitive situations or for higher‑priced homes, buyers sometimes offer 2 to 5 percent to strengthen an offer.
Think about these factors when choosing your amount:
- Local competition for the property in Franklin and Williamson County.
- The price point, which often drives the dollar amount even if the percentage is similar.
- Your risk tolerance, since a larger deposit increases exposure if you waive protections or miss deadlines.
- Seller expectations and local custom on recent deals.
Discuss a strategy with your agent based on the property and current market activity.
Contingencies that protect you
Contract contingencies work together with earnest money to balance risk. Each contingency has a deadline and a notice process. If you terminate within the allowed period and follow the notice rules, your deposit is typically returned.
Inspection contingency
You can inspect the property and either negotiate repairs or terminate within the inspection period. If you terminate per the contract, the deposit usually comes back to you.
Financing contingency
If you cannot secure your loan within the stated time and you give proper notice, you are typically protected and the deposit is returned.
Appraisal contingency
If the appraisal is lower than the contract price, you can try to renegotiate, bring extra cash, or terminate within the appraisal window. Proper termination generally leads to a refund of the deposit.
Title review
You can review the title commitment and raise objections. If issues cannot be fixed and you terminate within the title period, the deposit is typically returned.
Sale of home or HOA review
Some buyers include a sale‑of‑home contingency, and many contracts allow time to review HOA documents and budgets. If the contingency is not met, or HOA materials are not acceptable within the review period, you may terminate and recover the deposit per the agreement.
Deadlines and notices
Contingencies only protect you if you meet the deadlines and send notice in the way the contract requires. Missing a date or sending informal notice can put your deposit at risk.
If a deal falls through
Outcomes depend on the contract and facts. These are common Tennessee scenarios:
- Buyer terminates within a valid contingency window: deposit is typically returned after written instructions are provided to escrow.
- Buyer misses a deadline or waives a contingency, then backs out: seller may be entitled to keep the deposit as damages.
- Buyer cannot get financing without a clear financing contingency or proper notice: seller may claim breach and seek the deposit.
- Seller breaches, such as not providing marketable title: buyer is usually entitled to the deposit back and may have other remedies.
- Disputed deposit: escrow will hold funds until both parties agree in writing or the dispute is resolved by mediation, arbitration, or court order.
If both sides sign a release quickly, funds are usually returned fast. If there is a dispute, the timeline can extend from days to months.
Real‑world examples
- Example A, smooth closing: You buy at $400,000 with a $4,000 deposit. You complete inspection and financing, and close on time. Your $4,000 is credited at closing.
- Example B, inspection termination: During the inspection period you find a significant foundation issue and terminate per the contract. After signed termination and instructions, escrow refunds your deposit.
- Example C, waived financing: You waive your financing contingency to compete, then your lender denies the loan. You are likely in breach and the seller may keep your deposit.
- Example D, appraisal gap: The appraisal is $380,000 on a $400,000 contract. You can renegotiate, bring extra cash, or terminate within the appraisal window. If you terminate properly, your deposit is refunded.
Checklist before you deposit
- Confirm the escrow holder and get their contact details.
- Calendar every deadline for inspection, loan approval, appraisal, and title.
- Ask how notices must be delivered and use the required forms.
- Keep written records of all notices and acknowledgments.
- Verify how funds will be held and when they will be applied at closing.
- Review any dispute resolution clause so you know the process if there is a disagreement.
- Talk with your lender about cash to close so your deposit fits your budget.
Get local guidance
Your deposit amount and protections should match the property and the market conditions in Franklin. A smart plan can make your offer stronger without adding unnecessary risk. For clear next steps, schedule a brief buyer consult to map out deposit size, contingency timing, and offer terms tailored to your goals.
Ready to get started in Franklin or greater Williamson County? Reach out to Kathy Danner for a free consultation and a local strategy you can trust.
A quick reminder
This guide is general information. Your contract controls deadlines and outcomes. Consult your real estate agent, lender, title company, or an attorney for advice on your specific situation, and verify current local practices before you commit funds.
FAQs
What is earnest money in a Tennessee home purchase?
- It is a buyer’s good‑faith deposit that shows commitment, is held in escrow, and is credited to your cash to close if the sale finishes.
How much earnest money is typical in Franklin, TN?
- Many buyers offer about 1 to 3 percent of the price. In competitive or higher‑priced deals, 2 to 5 percent may be used to strengthen an offer.
Who usually holds earnest money in Williamson County?
- A neutral title or escrow company commonly holds it, though some brokerages hold smaller amounts in their escrow accounts under state rules.
When is earnest money due after an offer is accepted?
- Most contracts require delivery within 24 to 72 hours after both parties sign, but follow the exact deadline stated in your agreement.
When do buyers get earnest money back if a deal cancels?
- If you terminate within a valid contingency period and send proper notice, the deposit is typically refunded after escrow receives written instructions.
Is earnest money applied to my down payment at closing?
- Yes. If the sale closes, the deposit is credited to your down payment or closing costs on the settlement statement.
