Earnest Money in Wisconsin: What Madison Buyers Should Know

Are you wondering how much earnest money you should put down on a home in Madison? You are not alone. This small part of your offer carries big weight with sellers and your lender, and it can protect you or cost you depending on how you structure your contract. In this guide, you will learn what earnest money is, how it works in Wisconsin, typical local amounts, when it is due, how it is held, and the most common refund or forfeit scenarios. You will also get practical steps you can take now to set yourself up for a smooth path to closing. Let’s dive in.

What earnest money is

Earnest money is a good-faith deposit you include with a purchase offer to show a seller you are serious about buying. It is not an extra fee. If you close, it is credited toward your down payment or closing costs.

This deposit serves two purposes. First, it signals commitment to the seller. Second, it offers the seller limited protection if a buyer walks away without a valid contractual reason. The purchase contract and Wisconsin escrow rules govern how it is handled, released, or forfeited.

In some contracts, the earnest money may be treated as liquidated damages. That means if a buyer defaults, the seller’s agreed remedy may be to keep the deposit rather than pursue other damages. Whether that applies depends on the specific language in your offer.

Typical amounts in Madison

There are two common patterns for earnest money amounts:

• Flat-dollar deposits, often in the range of a few thousand dollars on many single-family homes.
• Percentage-based deposits, commonly about 1% to 2% of the purchase price in competitive markets. Some buyers offer more, such as 2% to 3%, to stand out.

In Madison and across Dane County, what is customary shifts with market conditions. In a balanced or buyer-friendly period, smaller deposits may be accepted. In multiple-offer situations, buyers often increase the deposit to strengthen the offer. Your deposit should fit the overall strength of your terms, including price, contingencies, and closing timeline.

For condominiums or lower-priced homes, flat-dollar deposits at the lower end may be considered. Always align the amount with your risk tolerance and the protections in your contingencies.

When and how you pay in Wisconsin

Typical timing

Your contract will specify when earnest money is due. Two timings are common:

• Submitted with the offer, using a check or wire, to show immediate proof of funds.
• Due within a short deadline after acceptance, often within 24 to 72 hours, as stated in the contract.

In competitive scenarios, delivering the deposit with the offer can signal readiness and help your offer stand out. Always confirm the required timeline in your offer and plan your transfer method in advance.

Who holds the funds

In Wisconsin, earnest money is typically held in an escrow account by one of the following:

• A title or closing company named in the offer
• A real estate brokerage’s client trust account
• An attorney’s client trust account, in less common cases

Your contract should name the escrow holder and indicate where funds are stored and how they will be disbursed.

Wisconsin practice notes

Wisconsin brokers and brokerages follow state rules for client trust accounts, recordkeeping, and disbursement procedures. The standard Offer to Purchase form commonly used in Wisconsin lets you specify the escrow holder and deposit delivery deadlines. Always obtain a receipt or written confirmation when you deliver earnest money. You will need this for your lender and for your records.

How refunds and forfeits work

Whether you can recover your deposit depends on your contract and your timing. If you exercise your rights under a contingency within the deadline and follow the notice requirements, earnest money is often refundable. If you miss deadlines or cancel without a contractual basis, you may forfeit the deposit.

Contingencies that protect you

Common buyer contingencies include:

• Inspection contingency. You have the right to inspect and either negotiate repairs or cancel within the inspection window. If you cancel within that period and follow contract rules, your deposit is typically refundable.
• Financing contingency. If you make a good-faith effort but cannot secure loan approval and cancel within the defined timeline, your deposit is generally refundable.
• Appraisal contingency. If the home appraises below the purchase price and you cancel in time per the contract, you typically can recover your deposit.
• Title contingency. If title defects are discovered and the seller cannot cure them within the contract timeline, you may be able to cancel and receive a refund.

Pay attention to written notice requirements. Missing a notice or removal deadline can jeopardize your refund rights even if your reason is valid.

When buyers can forfeit

You may forfeit earnest money if you breach the contract without a valid contingency. Examples include:

• Deciding not to proceed after contingencies have expired
• Failing to deliver required funds or missing a contractual step, such as timely loan application

Depending on the contract and state law, the seller may also pursue additional remedies. Some agreements use a liquidated damages clause that limits the seller’s remedy to keeping the deposit. The specific language controls, so review it with your agent and, if needed, your attorney.

If the seller defaults

If a seller refuses to close or otherwise breaches, you typically can seek the return of your earnest money. You may also consider other remedies provided in the contract, such as seeking specific performance or damages.

Disputes and escrow release

Purchase contracts usually explain how escrow funds are released. Many escrow holders require a written release signed by both parties. If the parties do not agree, the escrow holder may continue to hold funds until there is a settlement, arbitration, or court order. Some escrow holders may file an interpleader to let a court determine who receives the funds.

Lender requirements and your paper trail

Lenders treat earnest money as your funds that will be credited at closing. They will verify the source of those funds and the transfer history.

Expect to provide bank statements, copies of cancelled checks, and wire confirmations that show exactly where the money came from and when it was transferred. If a family member gifts the earnest money, your lender will typically request a gift letter and documentation that the donor had the ability to provide the funds and that the transfer followed program rules.

Many loan programs look for “seasoned” funds in your accounts. The length of time can vary by lender and program. The best approach is to tell your loan officer when you plan to place earnest money and ask what documentation they will need.

Lender checklist for buyers

• Keep every receipt and wire confirmation for your deposit.
• Save bank statements that show the transfer and the source.
• Avoid large unexplained deposits close to your loan application.
• For gifted funds, obtain a signed gift letter and supporting documents from the donor.

Strategy tips for Madison buyers

A thoughtful earnest money strategy can strengthen your offer without exposing you to unnecessary risk. Consider the following:

• Calibrate your deposit to the market. In multiple-offer situations, stronger deposits can help, but they should be paired with clear contingency language that protects you.
• Confirm escrow and timing in the offer. Name the escrow holder and set the delivery deadline you can confidently meet.
• Use contingencies purposefully. Inspection, financing, appraisal, and title protections should match your risk tolerance and loan program.
• Track deadlines. Put inspection, financing, and appraisal dates on your calendar. Missing a date is one of the most common reasons buyers lose deposits.
• Coordinate with your lender. Before you write an offer, discuss earnest money documentation so there are no surprises.
• Get everything in writing. Verbal promises do not control disbursement. Only the signed contract and written amendments do.

Key risks and pitfalls to avoid

• Assuming earnest money is always refundable. Refunds depend on your contract and your timing.
• Missing contingency deadlines. Late notices can void protections and put your deposit at risk.
• Skipping a receipt. Always get written confirmation from the escrow holder and save it for your lender.
• Using undocumented funds. Large, last-minute deposits can complicate underwriting.
• Leaving escrow details blank. Your offer should clearly name the escrow holder and describe how funds are handled.

Next steps

• Talk with your agent about a deposit amount that fits your goals and the current Madison market.
• Confirm who will hold the funds, how you will deliver them, and the exact deadline.
• Review contingency timelines and notice requirements so you know when and how to act.
• Loop in your lender early to confirm the documentation they will need for the deposit.

If you want a calm, clear plan for your purchase in Madison or greater Dane County, connect with Susan Sutton Homes for guidance that puts your interests first. Request a Complimentary Home Valuation & Concierge Plan to understand options if you also have a home to sell.

FAQs

What is earnest money in Wisconsin real estate?

• It is a good-faith deposit credited to your closing that shows commitment to the seller and is handled under your purchase contract and Wisconsin escrow rules.

How much earnest money is typical for Madison buyers?

• Many offers use either a flat-dollar amount or about 1% to 2% of the price, with higher deposits sometimes used to stand out in competitive situations.

When is earnest money due after an accepted offer in Wisconsin?

• Your contract sets the deadline, which is often with the offer or within 24 to 72 hours after acceptance.

Who usually holds earnest money in Madison, WI?

• A title company, a real estate brokerage’s client trust account, or an attorney trust account may serve as the escrow holder, as named in your offer.

When can a buyer get earnest money back in Wisconsin?

• If you cancel within a valid contingency period and follow the contract’s notice rules, the deposit is typically refundable.

When might a buyer forfeit earnest money in Wisconsin?

• If you cancel after contingencies expire or breach the contract without a valid contractual reason, the seller may be entitled to keep the deposit.

What happens if the seller refuses to release earnest money?

• Escrow holders usually require a written release from both parties or a legal resolution, and may hold funds until there is a settlement or court order.