Earnest Money in San Jose: How It Works

Buying in San Jose or the East Bay and wondering how much earnest money you need to put down? If you are a first-time buyer or relocating to Silicon Valley, you want to make a strong offer without putting your deposit at unnecessary risk. In this guide, you will learn what earnest money is, typical local deposit ranges, when funds are refundable, key timelines, and smart strategies to stay competitive. Let’s dive in.

What is earnest money?

Earnest money is a good-faith deposit you include with an offer to show the seller you are serious. If the sale closes, the deposit is credited toward your purchase price or closing costs. It is not a nonrefundable fee by default. The purchase agreement controls refundability, so your protections come from the contingencies and timelines in the contract.

Who holds your deposit

In most Bay Area transactions, the deposit is delivered to an escrow or title company trust account after your offer is accepted. In some cases, it is delivered to the listing broker and then transferred to escrow. The California Association of Realtors purchase agreement typically specifies who holds the deposit, how much it is, and when it is due. Escrow will issue a receipt and follow written instructions that govern any disbursement or refund.

Typical amounts in San Jose

There is no one-size-fits-all rule, but many markets start around 1% to 3% of the purchase price as a baseline. Because prices are higher and competition is strong, Silicon Valley deposits often look large in dollar terms even when the percentage is similar. For example:

• $1,000,000 home: 1% is $10,000, 2% is $20,000, 3% is $30,000.
• $2,000,000 home: 1% is $20,000, 2% is $40,000, 3% is $60,000.

For mid to high price homes in competitive areas, buyers commonly use flat deposits in the $10,000 to $50,000 range or more. For very high-priced properties, deposits can be several percent of the price and may reach six figures. In the Oakland–Hayward–Berkeley corridor, deposit percentages are often similar, while the dollar amounts can vary by neighborhood and price point.

Refundability and risk

As a general rule, earnest money is protected while your contingencies are valid and before you remove them. If you cancel within a contingency period per the contract, you typically receive a refund. Once you remove or waive contingencies, your deposit becomes more exposed if you later default.

Protected scenarios

• You cancel during the inspection period because a major issue is discovered and you follow contract notice steps.
• Your lender cannot approve your loan within the agreed terms and you cancel before the loan contingency expires.
• The property does not appraise for the contract price and you cancel under the appraisal contingency.

At-risk scenarios

• You remove inspection or loan contingencies to be competitive, then try to cancel later for a reason those contingencies would have covered.
• You miss a contract deadline or fail to deliver notices properly.
• You waive the appraisal contingency, the property appraises low, and you cannot bridge the gap. If the loan is denied and contingencies are already removed, the seller may have remedies.

Many California contracts use an optional liquidated damages clause that can cap the seller’s recovery at the agreed amount, often the deposit. Whether this applies depends on what you signed and how both parties act. Always follow contract timelines and documentation procedures to protect your rights.

Key contingencies explained

• Inspection contingency: Allows time to assess the property and negotiate or cancel if needed. Cancel on time per the contract to keep the deposit protected.
• Loan contingency: Protects you if your financing cannot be approved on the agreed terms. Coordinate closely with your lender to meet deadlines.
• Appraisal contingency: Gives you options if the appraisal comes in below the purchase price.
• Title and HOA review: Lets you review title reports, CC&Rs, HOA budgets, and meeting minutes for issues that may affect your decision.
• Home-sale contingency: If included, it can protect you when your purchase depends on selling your current home.

Timelines and escrow steps

A typical Bay Area flow looks like this:

1. Offer accepted.
2. Deposit delivered to escrow or the listing broker as the contract instructs.
3. Escrow opens, disclosures are exchanged, and contingency periods begin.
4. Appraisal and loan underwriting proceed, and contingencies are removed or exercised by deadlines.
5. Closing occurs, funds are disbursed, and the deposit is applied to your purchase.

Common timing patterns you may see locally:

• Deposit deadline: Often within 1 to 3 business days after acceptance, per the agreement.
• Inspection period: Frequently 5 to 10 business days.
• Loan contingency: Commonly 17 to 21 days, depending on lender readiness.
• Closing period: Many closings land in the 30 to 45 day range, with shorter timelines possible if both sides agree.

Your exact dates come from the signed purchase agreement. Missing a deadline can change your rights under the contract.

Offer strategies that balance risk

• Decide on a strategic deposit: A larger deposit can signal strength, but match it to your comfort level and contingency plan.
• Strengthen financing: Secure a strong pre-approval or pre-underwrite and provide clear proof of funds.
• Shorten, do not waive: Consider modestly shorter contingency periods rather than outright waivers.
• Appraisal gap planning: If you consider waiving appraisal, be ready with cash or a financing plan if the value comes in low.
• Pre-inspect when possible: Reviewing reports before you offer can reduce uncertainty and help you avoid unnecessary risk.

Safety tips for wiring funds

• Verify by phone with escrow using a known, trusted number before sending any wire.
• Never wire to a personal account or rely on email-only instructions.
• Request and keep a written receipt from escrow as soon as your deposit is received.

East Bay norms to know

In Oakland, Hayward, and Berkeley, buyers often use similar deposit percentages, although dollar amounts vary with price points and neighborhood competition. Timelines, contingency types, and escrow practices are broadly consistent with San Jose and Santa Clara County. Local listing expectations can differ, so align your deposit and contingency strategy with neighborhood norms for the specific property.

Next steps

Buying in San Jose or the East Bay is fast-paced, but with the right plan you can write a compelling offer while protecting your deposit. If you want help sizing your deposit, setting timelines, and coordinating inspection, appraisal, and loan milestones, we are ready to guide you. Reach out to Minna Real Estate to build a smart, local strategy for your next move.

FAQs

How much earnest money is typical in San Jose?

• Many buyers start around 1% to 3% of the price, with Silicon Valley deposits often larger in dollars because home values are higher.

When is earnest money refundable in California contracts?

• It is generally refundable while contingencies are active and you cancel within the agreed timelines using the required notices.

How soon do I need to deposit earnest money after acceptance?

• The contract sets the deadline, and many local deals call for delivery within 1 to 3 business days of acceptance.

What happens to my deposit at closing?

• Your earnest money is applied to your down payment or closing costs per the escrow instructions.

Can I lose my deposit if my loan falls through?

• If you remove the loan contingency and the loan later fails, your deposit can be at risk; keep the protection in place until you are confident in approval.

How can I make a strong offer without waiving protections?

• Use a solid pre-approval, provide clear proof of funds, offer a competitive deposit, and consider shortening contingency periods instead of waiving them entirely.