Who Holds Earnest Money While You Wait to Close?

Earnest money is usually held by a neutral third party: a title company, an escrow company, a real estate broker’s trust account or an attorney. The seller generally doesn’t get the money until closing. The holder keeps it until the deal closes or ends, then pays it out under the contract.

Who that is depends on your state and your contract. The holder is named in the purchase agreement, often right next to the amount. If you are still deciding how much earnest money to put down, check who will hold it at the same time, because that is who you will be sending money to.

The four usual holders

Holder	Where it’s common	What it does
Title company	Many states, especially where title companies run closings	Holds the deposit in escrow, runs the closing, credits it to you
Escrow company	Markets where independent escrow firms handle closings	Neutral holder that follows written escrow instructions
Broker trust account	States that let listing or buyer brokers hold deposits	Broker keeps it in a separate trust account under state license rules
Attorney	Attorney closing states, including New York	Attorney holds it in an escrow account until closing

This is a rough map, not a rule. Practice varies within states and from one deal to the next. Your agent will know the local custom.

Title and escrow companies

In many markets the escrow agent is the same title company that will close the sale. You deliver the deposit to them, they give you a receipt, and they hold it in an escrow account. At closing they apply it to what you owe.

The Texas resale contract is a clear example. It requires the buyer to deliver earnest money to the named escrow agent within 3 days after the effective date, and it says that at closing, the earnest money must be applied first to any cash down payment, then to the buyer’s expenses, with any excess refunded to the buyer.

Broker trust accounts

In some states a real estate brokerage can hold the deposit in a trust account set apart from the firm’s own money. Each state’s real estate commission sets the rules for these accounts, such as how fast the money must be deposited and what records the broker keeps.

Attorneys

In attorney closing states, the seller’s attorney often holds the money. The New York City Bar says the buyer’s down payment at contract signing is usually made out to the seller’s attorney, who holds it for safekeeping in a separate escrow account. In New York City that deposit is typically 10% of the price, far above the 1% to 3% common elsewhere.

What the holder does with your money

A good holder follows the contract and nothing else. In most deals, that means:

1. Receiving the deposit and giving you a written receipt.
2. Keeping it in an escrow or trust account, separate from its own money.
3. Waiting while you and the seller work through inspections, appraisal and financing.
4. Paying it out when the deal closes or ends, according to the contract.

The holder is not a judge. The Texas form says the escrow agent is not a party to the contract and is not liable for either side’s performance. It also says the escrow agent isn’t liable for interest on the deposit, or for losses caused by the failure of a bank where it was deposited, unless that bank is itself the escrow agent.

What happens at closing

If the sale closes, the deposit is credited to you. It lowers the cash you bring and appears on your Closing Disclosure on a line labeled Deposit. The guide on earnest money vs down payment walks through a $500,000 example, and the FAQ on whether earnest money goes to the seller covers who ends up with the cash.

What happens if the deal falls apart

When a sale ends before closing, most holders want written instructions from both sides before releasing the money. The Texas form, for example, lets the escrow agent require a written release from all parties before paying out any earnest money.

If the buyer and seller agree, they sign a release and the holder pays whoever is entitled to it. If they don’t agree, the money usually stays put. The guide on earnest money disputes covers what happens then, including demand letters, mediation and court.

How to check that your holder is real

Before sending money, confirm the holder is the one named in your contract.

1. Find the holder’s name in the signed purchase agreement.
2. Look up their phone number yourself, from a source you trust, not from an email.
3. Call and confirm the account details by voice.
4. Get a receipt once the deposit arrives.

Criminals pose as title companies and attorneys to steal deposits. The next guide, on how to pay earnest money, covers wire fraud and safe payment methods step by step. To see what a given deposit is as a percentage of your price, use the earnest money calculator.

Is escrow the same thing as earnest money?

Not quite. Escrow is the arrangement where a neutral party holds money or documents until conditions are met. Earnest money is one thing that can be held in escrow. The FAQ on whether earnest money is the same as escrow explains the difference, including the separate escrow account a lender may set up for taxes and insurance after you buy.