Earnest Money Explained For Redwood City Buyers

Buying in Redwood City moves fast, and so do decisions about earnest money. If you are a first-time or relocating buyer, that good-faith deposit can feel confusing and risky. You want to stay competitive without putting more on the line than you need to. In this guide, you will learn what earnest money is, how it works in California, typical amounts and timelines in San Mateo County, how contingencies protect you, and smart strategies for multiple-offer situations. Let’s dive in.

Earnest money in California, in plain terms

Earnest money is a deposit you provide after a seller accepts your offer. It shows good faith and becomes part of your down payment and closing costs if the deal closes. A neutral escrow or title company holds the deposit while everyone works through inspections, financing, and closing tasks.

In California, buyers and sellers commonly use the California Association of REALTORS® Residential Purchase Agreement. Your contract spells out the deposit amount, when it is due, how it is handled at closing, and what happens if either side defaults. The agreement can also include a liquidated damages clause that may limit the seller’s monetary recovery to the earnest money if a buyer defaults under certain conditions.

If there is a disagreement about who should receive the deposit after a cancellation, the escrow holder generally keeps the funds in trust until both parties sign written release instructions or a court or mediator decides. Escrow will not release disputed funds without proper written direction or an order.

Where the deposit sits

Once your offer is accepted, your deposit is placed into the escrow holder’s trust account. Escrow is a neutral third party that follows the purchase agreement and written instructions from both sides. The funds are applied to your purchase at closing.

What your contract controls

Your purchase agreement sets key terms: the deposit amount, how you deliver it (wire, cashier’s check, or personal check if permitted), the due date, and what happens at closing. It also defines remedies if a buyer defaults. Read these sections carefully. The timelines and notices in your contract drive your deposit risk.

Typical amounts and timing in Redwood City

On the Peninsula, deposit size is negotiable, but the market often nudges amounts higher than national norms. A common guideline in many markets is 1 to 3 percent of the purchase price. In Redwood City and nearby communities, five-figure deposits are common for single-family homes and condos, with higher-end properties requiring larger sums.

In multiple-offer situations, some buyers strengthen offers with larger deposits. A bigger number can signal commitment to a seller, even though your legal protections stay tied to your contingencies and contract deadlines.

When you send the funds

The initial earnest money is typically due to escrow within a few business days after acceptance. Many contracts set a short window, often around 2 to 3 business days, but the exact deadline is what you negotiate. Some agreements also include an additional deposit due after a milestone, such as inspection removal or loan approval.

Most financed purchases on the Peninsula close in about 30 to 45 days. Cash deals can close faster, sometimes 7 to 21 days, depending on title work, HOA documents if applicable, and seller readiness.

How contingencies protect your deposit

Contingencies are your safety net. They are conditions in the contract that let you cancel and receive your deposit back if certain issues are not resolved, as long as you act within the agreed timelines and give proper written notice.

Common contingencies include:

• Inspection contingency. You have a set period to inspect the property, review disclosures, and request credits or repairs. If you cancel within this period and follow the contract steps, your deposit is generally refundable.
• Loan or financing contingency. If you cannot secure loan approval in time despite good-faith efforts, you may cancel before the deadline and keep your deposit.
• Appraisal contingency. If the appraisal is lower than the purchase price, you can renegotiate, cover the gap, or cancel under the appraisal or loan contingency terms.
• Title contingency. You review the preliminary title report and may object to certain defects. If issues are not resolved, you can cancel per the contract.
• Buyer’s home sale contingency. Less common in competitive Peninsula markets, it allows you to cancel if your current home does not sell.

Removal vs. termination

Most contingencies require explicit written removal by a deadline. If you remove a contingency and then later try to cancel for an issue covered by that contingency, your deposit may be at risk. If you need to cancel, you must do so within the contingency period and give proper written notice per the contract.

Multiple-offer strategy on the Peninsula

Redwood City and much of San Mateo County often see multiple offers on well-priced homes, especially in neighborhoods near amenities and transit. In these moments, sellers look for financial certainty and a clear path to closing.

Here is how your deposit fits into the picture:

• Larger deposits can make an offer feel stronger to a seller. This does not change your legal protections if your contingencies remain in place, but it can influence a seller’s confidence in your commitment.
• Sellers tend to weigh price, contingency length and scope, deposit size, and closing speed together. You and your agent should align those pieces with your risk tolerance.

Three common offer profiles

• Conservative profile. Modest deposit in the 1 to 3 percent range, full inspection and loan contingencies, and standard removal periods. This is lower risk to your deposit, but it may be less competitive in a hot moment.
• Balanced profile. Larger deposit, shorter inspection and loan timelines, and possibly a limited appraisal gap commitment. You retain protections, but your deposit risk rises if you remove contingencies quickly.
• Aggressive profile. Large deposit and waived inspection or loan contingency, often used by cash buyers or buyers with highly certain financing. This is very competitive and carries the highest deposit risk.

Negotiation requests you may see

Sellers may ask for a larger initial deposit, a second deposit after a milestone, shortened contingency periods, contingency removal tied to acceptance, or a liquidated damages clause. Each term affects your deposit risk. Review these details with your agent before you sign.

Timeline and checklist for Redwood City buyers

Prepare before you write an offer so your deposit and deadlines are easy to meet.

Pre-offer checklist:

• Confirm your deposit funds are liquid and ready to wire or deliver by cashier’s check.
• Obtain a current lender pre-approval and be sure it reflects the purchase price range you are targeting.
• Discuss realistic contingency timelines with your agent and lender, including inspection scheduling and underwriting.
• Identify the escrow or title company that will receive your deposit and note their wiring instructions.
• Gather proof of funds that shows you can cover your deposit and down payment.

Typical timeline checkpoints:

• Initial deposit due. Commonly within 2 to 3 business days after acceptance, per the contract.
• Inspection period. Often 5 to 14 days, depending on the property and availability of inspectors.
• Loan contingency removal. Commonly 14 to 21 days, based on lender timelines and appraisal scheduling.
• Closing. Often 30 to 45 days for financed transactions; cash can be 7 to 21 days if documents are ready.

Key questions to ask your agent and escrow officer:

• What deposit amount is typical right now for this property type and price in Redwood City?
• How exactly do I deliver funds to escrow, and what forms are acceptable?
• What contingency deadlines fit my lender’s expected appraisal and underwriting timeline?
• If I remove a contingency, what deposit risk remains for me?
• What happens to my deposit if we cannot agree on repairs or my loan gets denied?
• Does our contract include a liquidated damages clause, and how does that affect my risk?

Managing risk without losing out

You want to stay competitive while protecting your deposit. Here are practical ways to do both:

• Keep a reasonable inspection contingency and use reputable inspectors so major issues surface early.
• Work with your lender to get a strong pre-approval and clear expectations for appraisal timing.
• Consider a meaningful deposit to signal commitment, but structure an additional deposit after a milestone rather than putting everything down up front.
• Use written notices and track deadlines closely. Timely communication is essential to protect your rights.
• Set contingency durations that match reality. Shorter timelines can win a seller’s attention, but only if you can meet them.

If a dispute arises over your deposit

If the buyer and seller disagree about who should receive the deposit after a cancellation, escrow generally holds the funds until both parties sign a mutual release or a court or mediator decides. This neutral holding protects both sides. Contract language like a liquidated damages clause can shape the outcome if there is a default, so understand what you have agreed to before you remove contingencies or cancel.

Ready to compete with confidence

With the right plan, you can write a strong offer in Redwood City without taking on more deposit risk than you intend. Focus on a deposit size that fits the home and market, pair it with timelines you can actually meet, and use contingencies wisely.

If you would like guidance tailored to your situation, reach out to Kathleen Pasin for boutique, concierge-level buyer representation across the Peninsula.

FAQs

What is earnest money in a California home purchase?

• It is a good-faith deposit you pay after your offer is accepted, held by a neutral escrow or title company and applied to your purchase at closing.

How much earnest money is typical in Redwood City?

• Amounts are negotiable, but many buyers offer around 1 to 3 percent of the price, with five-figure deposits common; higher-end homes often see larger deposits in competitive moments.

When is my deposit due to escrow in San Mateo County?

• Your contract sets the deadline, but many agreements call for delivery within about 2 to 3 business days after acceptance.

Which contingencies help me get my deposit back?

• Inspection, loan, appraisal, and title contingencies can allow you to cancel and receive a refund if you act within deadlines and give proper written notice per the contract.

What happens if I remove contingencies and then cancel?

• Once you remove a contingency in writing, your deposit may be at risk if you cancel for an issue covered by that contingency, unless other protections remain or the seller defaults.

How are deposit disputes handled by escrow in California?

• If there is a dispute, escrow typically holds the funds until both sides provide written instructions or a court or mediator determines who receives the money.