Making an offer on a home in Franklin? Your earnest money is a small deposit that carries big weight. It tells the seller you are serious, sets the tone for negotiations, and can protect or risk your dollars depending on what your contract says. In this guide, you’ll learn how earnest money works in Williamson County, what amount is typical, how Tennessee timelines and contingencies affect refunds, and practical steps to protect your deposit. Let’s dive in.
Earnest money basics
Earnest money, sometimes called a good faith deposit, is money you put down when your offer is accepted to show you plan to complete the purchase. It is not an extra fee. If you close, it is credited to your cash to close, which includes down payment and closing costs.
In Franklin and across Tennessee, the purchase agreement spells out the earnest money amount, who holds it, and when it is due. Funds are held in escrow by a neutral third party, often a title company or closing attorney. The escrow holder issues a receipt and keeps the funds until closing or until the parties agree in writing on a release.
Typical amounts in Franklin
Franklin and greater Williamson County are competitive and higher priced than many Tennessee markets. As a result, buyers often use stronger deposits to stand out.
- Common range: about 1% to 3% of the purchase price
- In hot situations: some buyers offer 3% to 5% or more
- Entry-level or certain new construction: flat amounts like $1,000 to $5,000 may be used
Here is how that looks at local price points:
- $400,000 home: 1% = $4,000, 2% = $8,000
- $650,000 home: 1% = $6,500, 2% = $13,000, 3% = $19,500
- $1,200,000 home: 1% = $12,000, 2% = $24,000, 3% = $36,000
What is typical changes with market heat and price tier. Luxury listings often see larger deposits in both percentage and dollar terms.
How the Tennessee contract handles it
The Tennessee REALTORS standard purchase agreement includes sections for your earnest money amount, the escrow holder, and the deposit deadline. Always follow those exact terms.
- Deposit deadline: commonly 1 to 3 business days after final acceptance, or by a specific date written in the contract
- Escrow holder: usually a title company or closing attorney; sometimes a broker escrow account
- Delivery method: many escrow holders require a wire transfer or cashier’s check; allow for bank processing time
- At closing: your earnest money is credited to your closing funds
If you miss the deposit deadline, you can be in default under the contract. Deliver early and get written confirmation that funds were received and cleared.
Contingencies and refund rights
Your right to a refund depends on contingencies and strict notice rules in your signed agreement. Read each contingency and track the deadlines.
Common refundable scenarios
- You terminate within the inspection period and give proper notice
- Your loan is denied and you terminate within the financing contingency timeline
- The appraisal comes in low and you terminate under an appraisal or financing contingency within the notice period
- The seller cannot deliver clear title by closing under the contract’s timeline
When your deposit is at risk
- You change your mind after contingencies expire
- You miss a notice deadline, then try to terminate later
- You fail to close for reasons not covered by a contingency in your contract
How disputes are handled
- Most releases require a mutual written agreement from buyer and seller
- If parties disagree, the escrow holder will typically hold funds until there is a written agreement or a court order
- Some contracts include mediation or arbitration procedures
- In contested situations, an escrow holder can file an interpleader with a court to decide who receives the funds
Timelines you should track
- Earnest money deposit due: often 1–3 business days after acceptance
- Inspection period: commonly 5–14 days
- Loan/financing contingency: often 21–30 days for lender commitment
- Appraisal timing: typically aligns with the financing timeline
- Closing date: when earnest money is applied to your buyer funds
Always follow the contract’s notice rules, including delivery method, who receives the notice, and deadlines.
Protecting your deposit as a buyer
Use these steps to keep your earnest money safe and your transaction on track:
- Calendar every contingency deadline on day one
- Get a strong pre-approval from your lender and keep documents ready
- Choose a reputable title company or closing attorney as escrow holder
- Deliver funds early and get a receipt confirming cleared funds
- Schedule inspections immediately and follow the contract’s notice format
- Avoid waiving contingencies unless you fully accept the risk
- For wires, always verify instructions by calling the escrow office at a known number to prevent wire fraud
Strengthening your offer in Franklin
When you want to stand out in a multiple-offer situation, earnest money can help:
- Increase your deposit within your comfort zone, such as moving from 1% to 3%
- Shorten the deposit deadline, such as “due next business day”
- Provide proof of funds and your lender pre-approval with the offer
- Tighten contingency timelines you can realistically meet, such as a 7-day inspection instead of 14
Larger or faster deposits can improve your offer’s strength, but they also raise the stakes if you miss a deadline. Balance competitiveness with protection.
Tips for sellers on earnest money
As a seller, your goal is to confirm the buyer’s commitment and keep the process clear.
- Specify the escrow holder and deposit due date in the contract
- Ask for proof of deposit from the escrow holder once funds clear
- Track contingency dates and keep records of all notices
- If a default is claimed, follow the contract’s notice steps and consult your trusted advisors
Real-world scenarios
Here are examples that show how earnest money and contingencies work together in Franklin transactions. Details will vary based on your signed contract.
Example 1: Competitive mid-market purchase
You offer on a $650,000 Franklin home with 2% earnest money ($13,000), due within two business days. You choose a 7-day inspection and a 25-day financing timeline. Your inspection finds items you want to negotiate. You submit a written request within the inspection period. If no agreement is reached and you give timely notice to terminate as allowed by the contract, your earnest money is typically refundable. If you proceed, your deposit stays in escrow and is applied at closing.
Example 2: Luxury listing with tight timelines
On a $1,200,000 home, you put down 3% ($36,000) to strengthen your offer and set a 1-business-day deposit deadline. You plan a 10-day inspection and your lender aims for a commitment by day 21. If the appraisal comes in low, your options depend on your appraisal or financing contingency. You might renegotiate price, bring extra cash if you choose, or terminate within the allowed window and notice terms. Missing a notice deadline can put your deposit at risk, so track dates closely.
Example 3: Entry-level purchase with a flat deposit
For a $400,000 home, you negotiate a $4,000 earnest money deposit and a 10-day inspection period. Your loan is later denied. If you have a financing contingency and you provide written notice within the timeline set in the contract, your earnest money is typically refundable. If the timeline has passed and you try to terminate without a valid contingency, you could be in default.
What to expect at closing
If the sale closes, your earnest money is credited on your settlement statement and applied to your cash to close. You will see it listed as a credit toward your down payment and closing costs. The escrow holder sends the funds to the closing agent as part of the final accounting.
Work with a team that knows Franklin
Your earnest money strategy should match the property, price point, and how competitive the market is that week. A local expert can help you set the right amount, choose timelines you can hit, and protect your deposit at each step. If you are relocating to Williamson County or moving up in Franklin, connect with the Middleton Team for clear guidance and high-touch representation from offer to close.
FAQs
What is earnest money in a Tennessee home purchase?
- It is a good faith deposit held in escrow that shows you intend to buy; if you close, it is credited to your cash to close.
How much earnest money is typical in Franklin, TN?
- Many buyers offer about 1% to 3% of the price, with higher percentages in competitive situations and flat amounts on some entry-level or new builds.
When is earnest money due in Tennessee contracts?
- The purchase agreement sets the deadline, often 1 to 3 business days after acceptance or by a specific date stated in the contract.
Is earnest money refundable if my loan is denied?
- If your contract includes a financing contingency and you give proper notice within the timeline, the deposit is typically refundable.
Can I get my earnest money back if the appraisal comes in low?
- If you have an appraisal or financing contingency and you act within the notice period, you can usually terminate and receive a refund.
Who holds earnest money in Williamson County?
- Most transactions use a title company or closing attorney as the escrow holder; some use a broker escrow account under state rules.
What happens to earnest money if the sale closes?
- It is applied as a credit on your closing statement toward your down payment and closing costs.
