Is earnest money stressing you out as you plan a home purchase in San Jose? You are not alone. In a fast, high‑price market, it can feel risky to wire thousands of dollars as soon as your offer is accepted. The good news is that you can structure your deposit to stay competitive while protecting your interests. In this guide, you will learn how earnest money works in San Jose, what is typical for deposit size and timing, and how contingencies help safeguard your funds. Let’s dive in.
What is earnest money?
Earnest money is a good‑faith deposit that shows you are serious about buying a home. It is part of the purchase contract and is credited to you at closing. It is not an extra fee, and it is separate from your down payment and closing costs.
If the sale closes, your deposit is applied to your purchase price or costs. If you cancel within valid contingency timelines, the deposit is typically returned according to the contract. If you default without contingency protection, the seller may claim the deposit as damages, based on the contract terms.
Where your deposit is held
In California, earnest money is usually deposited into an escrow or broker trust account. Most San Jose transactions use an escrow company’s trust account, although some brokerages accept and deposit funds into a broker trust account.
- You should receive a written receipt and escrow instructions that show where funds are held and how they will be applied.
- Verify the escrow provider and confirm instructions before sending money. Wire fraud is a real risk, so confirm phone numbers and wire details by calling a known, verified number.
Typical San Jose deposit sizes
San Jose and Santa Clara County are competitive, high‑price markets, so deposit expectations often exceed national norms. While the common national rule of thumb is about 1 to 3 percent of the purchase price, local practice varies with price point and competition.
- Conservative or standard offers: around 1 percent of the price, or a modest flat amount. This is more common when you include full contingencies or the market is less competitive.
- Competitive local offers: 2 to 5 percent of the price, or a larger flat amount. Higher‑priced homes sometimes use a flat figure in the tens of thousands.
- Aggressive offers: 5 percent or more. These are often paired with shorter timelines or waived contingencies and carry higher risk.
For scale only, an $800,000 purchase at 3 percent would be $24,000, and a $1,500,000 purchase at 5 percent would be $75,000. These are illustrative examples. The right number depends on the property, competition, and your risk tolerance.
When you pay the deposit
The purchase agreement controls the deadline, and timing can be strict. In many local contracts, buyers are expected to deliver the deposit within 1 to 3 business days after acceptance. Escrow typically opens immediately, and the seller may view delays as a risk of default.
Other common timelines in Santa Clara County include:
- Inspection contingency: often 7 to 14 days, sometimes shorter when competition is high.
- Loan contingency: commonly 17 to 21 days, adjusted based on lender speed and your documentation.
- Appraisal contingency: often tied to the loan contingency window.
- Closing: many local closings occur 30 to 45 days from acceptance, depending on financing and parties.
Always follow the exact dates set in your contract. Missing a deadline can increase your deposit risk.
How contingencies protect your deposit
Contingencies give you a contractual escape if certain conditions are not met. If you cancel within the contingency period and follow the contract’s notice rules, your deposit is typically returned.
Inspection contingency
- Lets you investigate the property and request repairs or credits.
- If you cancel within the inspection window, your deposit is usually refunded.
- Waiving or shortening this contingency can make your offer stronger, but it raises risk if surprises appear.
Financing contingency
- Protects you if your mortgage is denied or cannot be obtained by the deadline.
- If you cancel within the loan contingency period due to financing failure, your deposit is generally returned.
- Shortening or waiving increases risk. Strong pre‑approval helps you keep timelines realistic.
Appraisal contingency
- Helps if the appraised value comes in below the purchase price.
- You can negotiate, bring extra cash, or cancel if the contingency is in place.
- Waiving this exposes you to covering an appraisal shortfall.
Title, HOA, and disclosures
- You can review title reports, HOA documents, and seller disclosures during a set period.
- If a material concern arises and you cancel on time, the deposit is typically protected.
Sale of buyer’s home contingency
- Ties your purchase to the successful sale of your current home.
- If your home does not sell in time, you can cancel within the contingency window and protect your funds.
Liquidated damages and release basics
Many California contracts include an optional liquidated damages clause. If both parties initial this clause and the buyer defaults, the seller’s remedy may be limited to the deposit amount, as defined in the agreement. Whether this applies depends on the specific language in your purchase contract.
Escrow companies follow written joint instructions from the buyer and seller to release funds. If there is a dispute, escrow typically holds the money until both sides agree in writing or there is a court or arbitration order. This is why timely, written notices and clear documentation matter.
Offer strategies for San Jose buyers
You can balance competitiveness with protection by planning your deposit and timelines before you write.
Before you write
- Secure a strong lender pre‑approval, not just a pre‑qualification.
- Line up an inspector so you can schedule inspections quickly.
- Ask your agent about current competition, number of offers, and deposit expectations for similar homes.
Structure the deposit strategically
- Moderately competitive conditions: consider 1 to 2 percent or a solid flat amount.
- Multiple‑offer situations: 3 to 5 percent can help your offer stand out, but know the added risk if you shorten or waive contingencies.
- Step‑up approach: make the initial deposit refundable during contingencies, then increase the deposit after removing key contingencies. Put the terms in the contract.
Use contingency timelines to your advantage
- Shorter windows can appeal to sellers. Only offer what you can realistically meet.
- Coordinate with your lender on appraisal and loan milestones so your dates match their process.
Execute and document every step
- Send funds by a traceable method, often a wire to the escrow company or a cashier’s check.
- Get a written escrow receipt and confirm the funds are deposited into a trust account.
- Deliver all contingency removals or cancellations in writing, by the deadlines in the contract.
If issues arise
- Inspection problems: request repairs or credits, or cancel within the inspection period to protect your deposit.
- Loan denial: if you must cancel within your loan contingency timeline, provide required documentation to escrow and the seller.
- Disputes: involve your agent promptly. Many matters resolve through mediation or standard escrow procedures.
Smart safety steps for deposits
- Confirm wire instructions by calling the escrow company using a verified phone number.
- Never rely on wire details received in an unexpected email or text.
- Verify the escrow or brokerage is licensed to hold trust funds.
- Keep copies of receipts and all written notices.
What to remember in Santa Clara County
Local norms shift with the market. In some seasons, a 1 to 2 percent deposit with standard contingencies is acceptable. In other moments, sellers expect larger deposits and shorter timelines. Your best move is to plan your earnest money strategy before you write, align it with your financing, and protect your downside with clear, realistic contingency dates.
When you want a tailored plan for a specific San Jose home, connect with a local expert who understands price tier expectations and how to balance risk and reward. If you are ready to move forward confidently, schedule a quick planning call with Rajiv Kohli to map out your deposit strategy, align your contingencies with your lender, and position your offer to win.
FAQs
How much earnest money do buyers in San Jose usually pay?
- Many local offers range from about 2 to 5 percent in competitive situations, while 1 percent can work with fuller contingencies or when demand is lighter. The right number depends on the price point and competition.
When is earnest money due after an offer is accepted in Santa Clara County?
- Many contracts call for delivery within 1 to 3 business days of acceptance, but your purchase agreement controls the exact deadline.
How do contingencies protect my earnest money in San Jose?
- If you cancel within valid contingency windows, such as inspection or loan contingencies, and follow notice rules in the contract, your deposit is typically returned.
Can I make part of my deposit non‑refundable to strengthen my offer?
- Some buyers make an initial refundable amount, then increase the deposit after removing key contingencies. This can help competitiveness, but it adds risk and must be documented clearly in the contract.
What happens to my deposit if the appraisal is low?
- With an appraisal contingency in place, you can negotiate, bring additional cash, or cancel within the timeline. If you waive the contingency, you assume the shortfall risk and your deposit is more exposed.
Who holds my earnest money in a San Jose transaction?
- Typically an escrow company’s trust account holds the funds, although some brokerages use a broker trust account. You should receive a written receipt and escrow instructions.
How can I avoid wire fraud when sending my deposit?
- Call the escrow company using a verified phone number to confirm instructions, and never rely on wire details sent in an unexpected email or link.
