Earnest Money In Chicago: What Buyers Should Know

You finally found a Near North Side condo you love. Then your agent mentions earnest money and deadlines, and you are not sure what it really means for your budget. You are not alone. Understanding how earnest money works in Chicago helps you write a stronger offer and protect your deposit. In this guide, you will learn the essentials, local norms, and smart steps to keep your funds safe. Let’s dive in.

Earnest money basics

Earnest money is a good-faith deposit you make when your offer is accepted. It signals to the seller that you intend to complete the purchase. The money is held in escrow and, if you close, it is credited toward your purchase price or closing costs. If you walk away without a contractual reason, the seller may be entitled to keep the deposit.

Typical amounts in Near North Side

In Chicago’s urban markets, including the Near North Side, a common range is about 1 to 3 percent of the purchase price. In competitive situations, buyers sometimes offer more to stand out.

• Example: $300,000 condo → 1 percent is $3,000, 2 percent is $6,000.
• Example: $800,000 townhome → 1 percent is $8,000, 2 percent is $16,000.

The right number depends on market conditions, property demand, and your financing. All-cash buyers sometimes increase the deposit to strengthen their position.

Where your deposit is held

Your contract names the escrow holder. In Chicago, the earnest money is often deposited with a title company, a real estate attorney’s trust account, or a broker’s trust account. Many buyers choose the title company that will handle the closing so everything is centralized. The funds stay in that escrow account until closing or until both parties sign a written release.

Deadlines and delivery

Your contract will set the amount and the delivery deadline, commonly within 24 to 72 hours after acceptance. You will also see the required form of payment, such as a wire, certified check, or personal check. Follow the instructions precisely and keep receipts or confirmations. Missing a deadline can put your contract at risk.

Key contingencies that protect you

The purchase contract controls when you can cancel and receive your earnest money back. Common buyer protections include:

• Inspection contingency: Allows you to inspect the home and request repairs, credits, or cancellation within a set period.
• Financing or mortgage contingency: Protects you if you cannot secure a loan under the terms outlined in the contract.
• Appraisal contingency: Lets you address a short appraisal, often with options to renegotiate or cancel.
• Title and association documents: Gives you time to review title commitments and condo association documents.

If you cancel within the agreed contingency period and follow the notice requirements, your deposit is typically returned.

Condo specifics in Near North Side

Condos are common on the Near North Side, so plan for association document review. You should receive a resale package with budgets, rules, meeting minutes, reserve information, and details on any special assessments or litigation. Your contract should include a clear condo-docs review contingency. If the documents reveal information that does not work for you, you can usually cancel within the review window and receive your earnest money back, as long as you follow the contract exactly.

When you could lose it

If you default without a valid contractual reason, the seller may be entitled to keep your earnest money as liquidated damages or pursue other remedies. Risk increases if you agree to non-refundable deposits or waive contingencies. Before taking either step, talk with your lender and a real estate attorney so you understand the downside.

How disputes are handled

Most disagreements resolve with a signed mutual release directing the escrow holder how to disburse funds. If the parties cannot agree, the escrow holder may hold the money until the dispute is settled. In rare cases, the escrow holder can file an interpleader with the court to let a judge decide who receives the funds. Keep a clear paper trail of notices, inspection reports, and lender communications to support your position if a dispute arises.

Smart strategies in a competitive market

• Align your deposit with market intensity. A well-calibrated deposit can signal strength without taking on unnecessary risk.
• Keep your protections. Rather than waiving contingencies, tighten timelines and prepare in advance so you can perform quickly.
• Pair with proof of funds and preapproval. A strong deposit plus a clear financing package helps your offer stand out.
• Use a reputable escrow holder. Title companies and attorney trust accounts are standard in Chicago.

Step-by-step buyer checklist

Before you write an offer:

• Decide on a deposit amount in the 1 to 3 percent range, adjusted for competition and your risk tolerance.
• Line up a lender preapproval and gather proof of funds.

At contract acceptance:

• Confirm the escrow holder, the deposit amount, and the exact delivery deadline.
• Verify the required payment method and obtain wiring instructions securely.
• Lock in your contingencies and deadlines for inspection, financing, appraisal, and condo-docs review.

During contingencies:

• Schedule inspections immediately and deliver any notices in writing before deadlines.
• Keep copies of emails, receipts, and delivery confirmations.

Before closing:

• Confirm how your earnest money will be applied to the purchase price or closing costs.
• Review your settlement statement for the credit.

After a cancellation:

• Use a written mutual release to direct the escrow holder how to disburse funds.
• Seek legal guidance if you anticipate a dispute.

Wiring safety and fraud prevention

Wiring instructions are a common target for fraud. Always confirm wire details by calling your title company or attorney using a known phone number. Do not rely only on emailed instructions that have not been verified. Keep your wire confirmation and receipts.

The bottom line for Near North Side buyers

Earnest money is a powerful tool. It helps you compete in the Near North Side market and protects the seller if you default. The contract language controls what happens to the deposit, so deadlines and procedures matter. Build in the right contingencies, perform on time, and keep records. With the right plan, you will be protected and ready to close with confidence.

Ready to talk through your offer strategy, deposit amount, and timing for your Near North Side purchase? Reach out to John Lyons to schedule a free consultation.

FAQs

How does earnest money work in Chicago condo purchases?

• You deposit funds with the named escrow holder, then the money is credited to you at closing or returned if you cancel within valid contingencies and follow the contract.

How much earnest money should I offer in the Near North Side?

• A common range is 1 to 3 percent of the price, adjusted for competition, property demand, and your financing strength.

Where is my earnest money held in Chicago?

• It is typically held in an escrow or trust account at a title company, a real estate attorney’s trust account, or sometimes a broker’s trust account.

When do I risk losing my earnest money?

• You risk forfeiture if you default without a contractual basis, such as missing deadlines or canceling outside valid contingencies.

What condo documents should I review before risking my deposit?

• Review budgets, reserves, rules, meeting minutes, litigation disclosures, and any special assessments within the contract’s review period.

What happens if the seller and I disagree about returning my deposit?

• The escrow holder may require a mutual release or hold funds until the dispute is resolved, and in rare cases may file an interpleader in court.