Earnest Money Deposits in California Explained

Buying a home in West Hills or greater Los Angeles and wondering how earnest money really works? You are not alone. That first deposit can strengthen your offer, but it also carries risk if you miss deadlines or waive protections. In this guide, you will learn what earnest money is in California, typical deposit amounts in West Hills, when it is refundable, and how to use it strategically without taking on more risk than you intend. Let’s dive in.

What earnest money is

Earnest money is a good-faith deposit that you submit after your offer is accepted. In California, it is held in escrow and applied to your down payment and closing funds if you close. It signals to the seller that you are serious and gives the seller some protection if you default under the contract.

Escrow or a title company holds the funds in a trust account and releases them only by mutual written instructions, closing documents, or a dispute resolution process. You will see the amount and handling spelled out in your purchase agreement and escrow instructions.

Typical amounts in West Hills

Across many markets, a common guideline is 1 to 3 percent of the purchase price. In competitive Los Angeles neighborhoods, including West Hills, many buyers push toward the high end of that range or higher to stand out. Your exact number depends on price point, market competition, financing strength, and negotiation.

Illustrative examples at local price points:

• Example at 800,000 purchase price: 1 percent is 8,000, 2 percent is 16,000, 3 percent is 24,000.
• Example at 1,500,000 purchase price: 1 percent is 15,000, 2 percent is 30,000, 3 percent is 45,000.

These figures are examples to show the math. Your strategy should match current West Hills activity, seller expectations, and your risk tolerance.

When you pay and how escrow handles it

Your purchase agreement sets the deadline to deliver the deposit. On widely used California forms, that is commonly within 24 to 72 hours, often described as 3 business days after acceptance. Always follow the exact timing stated in your contract.

How funds are delivered and held:

• Delivery: Many escrows require a wire transfer. Some accept a personal or cashier’s check. Confirm instructions with the escrow officer.
• Proof: Get a receipt or confirmation from escrow and keep it in your records.
• Interest: Ask whether the funds will be placed in an interest-bearing account and who receives any interest, if applicable.
• Release: At closing, the deposit is applied to your funds due. If the deal cancels, escrow only releases funds with mutual written instructions or as directed by a dispute process.

Refundability and contingencies

Your deposit is usually refundable if you cancel properly within specific contingency periods in the contract. Common buyer protections include:

• Loan contingency: You may cancel if financing is denied within the set period.
• Appraisal contingency: If the appraisal comes in low, you can renegotiate or cancel within the allowed time.
• Inspection contingency: After inspections, you can cancel or request repairs within the deadline.
• Title, HOA, or CC&R review: You can review documents and cancel within the stated window.

Key mechanics to protect your refund rights:

• Follow the notice rules in the agreement. Provide written notice to cancel within the contingency period.
• Track deadlines. If you remove contingencies or let them expire, your right to a refund drops significantly.
• Keep records. Hold onto inspection reports, lender updates, and appraisal documents to support a timely, contract-based cancellation.

When can a seller keep the deposit? If you remove contingencies and then do not perform, the seller may be entitled to the deposit as liquidated damages or may seek other remedies. If there is a dispute over who should receive the funds, escrow will typically require mutual written instructions or defer to arbitration or court through an interpleader process.

Competitive offer strategies in LA

In West Hills and other competitive Los Angeles areas, buyers often use deposit terms to strengthen their offers. Here are common strategies and the tradeoffs:

• Increase the deposit amount. A larger deposit shows stronger commitment, which some sellers value.
• Shorten contingency periods. Faster inspections or loan approval can be appealing to sellers.
• Consider partial non-refundable amounts. Some buyers offer a portion of the deposit to become non-refundable after a short period. This carries high risk and should be used only with careful guidance.
• Waive contingencies completely. This is very risky and should be reserved for buyers who fully understand the exposure and have strong cash reserves.

Illustrative local scenarios:

• Example A: For an 850,000 West Hills listing, a buyer offers a 2 percent deposit (about 17,000) with standard contingencies and a 10-day inspection period. Modest boost, low risk if deadlines are met.
• Example B: For a 1,200,000 property, a buyer offers a 3 percent deposit (about 36,000), a 5-day inspection contingency, and a 17-day loan contingency. Stronger seller appeal, higher risk if financing falls through.
• Example C: A buyer offers 25,000 to become non-refundable after 48 hours. Very attractive to some sellers, very risky for the buyer if issues arise later.

Before agreeing to short timelines, partial non-refundable deposits, or waived protections, consult your agent, lender, and, for complex terms, a real estate attorney.

Pros and cons of bigger deposits

Step-by-step buyer checklist

• Get pre-approved. Align your loan timelines with the contract and ask your lender about pre-underwriting.
• Plan your deposit logistics. Confirm wire instructions with escrow and verify them by phone using a trusted number. Be mindful of wire fraud risk.
• Know your deadlines. Enter inspection, appraisal, and loan dates into your calendar and share them with your agent and lender.
• Schedule inspections day one. Order general and specialized inspections right away to stay within the timeline.
• Track appraisal timing. Coordinate with your lender to get the appraisal ordered immediately after acceptance.
• Communicate in writing. Use written notices for requests, approvals, and contingency removals, and keep confirmations.
• Remove contingencies carefully. Only remove a contingency when you are satisfied with the results and financing.

Common pitfalls to avoid

• Missing contingency deadlines. This can unintentionally convert a refundable deposit into a deposit at risk.
• Vague contract language. Make sure contingency terms and response times are specific and in writing.
• Slow inspection scheduling. Waiting reduces your options if issues arise.
• Removing protections too soon. Do not rush to waive contingencies without a full picture of condition, value, and financing.

Local takeaways for West Hills buyers

• Start with the 1 to 3 percent guideline, then adjust based on current competition and your comfort with risk.
• In hot segments, a stronger deposit and tighter timelines can help, but pair that with a realistic plan to meet those deadlines.
• Protect your refund rights by following the contract precisely and keeping documentation.

Ready to craft a winning offer strategy for a West Hills home? Connect with Bruce Barz for tailored guidance on deposit size, contingency timing, and negotiation tactics that fit your goals.

FAQs

How much earnest money should I offer in West Hills?

• Many buyers start at 1 to 3 percent of the price, then adjust for competition, property condition, and their financing strength.

Is my earnest money safe in California escrow?

• Escrow holds funds in a trust account and releases them only by mutual instruction, closing documents, or dispute resolution procedures.

When do I have to deposit my earnest money in Los Angeles?

• Your contract sets the deadline. On common California forms, it is often within 24 to 72 hours, frequently described as 3 business days after acceptance.

Can I get my deposit back if the appraisal is low in California?

• If your contract includes an appraisal contingency and you act within the deadline, you can usually renegotiate or cancel and receive a refund.

Can a seller keep my deposit if inspections reveal issues?

• If you cancel properly within your inspection contingency period, the deposit is typically refundable. If you waive or miss that period, your risk increases.

What happens if there is a dispute over my deposit?

• If buyer and seller cannot agree on disbursement, escrow will usually require mutual instructions or rely on arbitration or court to resolve the claim.