Guide to Earnest Money Deposits at Bluegrass Land Title

Earnest Money Basics

Earnest money isn't an additional fee. It is paid by the buyer early in the transaction and held by a neutral third party while the sale is pending. Kierra Bozeman, Marketing Director at Bluegrass Land Title, says, “ Earnest money is a good-faith deposit that shows the seller you’re serious about purchasing the property.” At closing, the earnest money deposit is applied toward the purchase price. If the sale doesn't close, the purchase agreement determines whether the money returns to the buyer or goes to the seller.

The earnest money section of a purchase agreement is only a few lines long, but it governs how the deposit is handled from the day it’s submitted to the day it’s released. The holder follows those terms as written. “We go strictly by the purchase agreement,” Bozeman says. “That’s why buyers and sellers should pay close attention to the earnest money section of the contract.” 

Before signing, buyers and sellers should review four key earnest money terms in their purchase agreement: the amount, deadline, holder, and conditions for release. 

• Amount: The buyer proposes an amount in the offer, and the seller can accept or negotiate. The amount can vary based on the property, market conditions, and the offer terms. 
• Deadline: The purchase agreement typically requires the buyer to deliver the deposit within three days. Missing that deadline breaches the contract, and the seller can then grant a written extension, void the contract, or pursue a claim for damages.
• Holder: The contract names who will hold the earnest money deposit. Most choose a title company, but the parties can also agree to have either the buyer’s or seller’s agent brokerage hold it. 
• Conditions for return: If the sale doesn't close, the contract determines whether the buyer gets the deposit back or the seller keeps it. These conditions are usually tied to contingencies, such as financing or the appraisal.

These terms apply from the day the contract is signed until the sale closes or the contract is terminated.

How Earnest Money is Held and Applied

Once the buyer submits earnest money, neither the buyer nor the seller controls it. The party holding the deposit is responsible for the funds and acts only on the terms of the purchase agreement. The buyer can't take the money back without the seller's agreement, and the seller can't claim it unless the contract supports that outcome.

Many buyers and sellers choose the title company to hold the earnest money deposit because it is truly neutral and represents neither the buyer nor the seller. Its job is to carry out the contract terms, not advocate for one party. 

Submitting an Earnest Money Deposit to Bluegrass Land Title

When Bluegrass Land Title is named as the holder, buyers can choose to deposit their earnest money in one of three ways. “Buyers can choose whatever method is most convenient to them. All are valid ways to deposit their earnest money,” Bozeman explains.

• Drop off a check: Buyers or their agent can bring a personal check or money order to any Bluegrass Land Title office. The person at the front desk will ask for the property address and the agent’s name, add the deposit to the file, and provide a receipt on request. Bluegrass Land Title also sends confirmation of the deposit to the buyer's agent, who typically shares it with the seller's agent.
• DepositLink: Buyers can securely send funds for their earnest money deposit online through DepositLink. DepositLink functions like “Venmo” or “PayPal”; no check is required. When using DepositLink, a small fee is charged to the buyer at the time of the transaction.
• Bankshot: Use the Bluegrass Land Title Bankshot portal to send a digital earnest money deposit using a physical check. Bankshot works the same way as depositing a check using your online bank software. No fee is charged to the buyer when using Bankshot. 

Visit here to view detailed instructions for each earnest money deposit method. 

The purchase agreement sets the deadline, but Bluegrass Land Title accepts earnest money deposits at any point before that time. To remain neutral, Bluegrass Land Title doesn't monitor or enforce the contract's deposit deadline. Buyers are responsible for submitting the deposit on time, and many agents follow up with their clients to confirm it was made.

Bluegrass Land Title deposits the funds into its escrow account, where they remain until closing or until a signed termination agreement directs their release.

How the Earnest Money Deposit is Applied at Closing

Earnest money counts toward the money the buyer brings to closing. The buyer simply pays that portion earlier in the process. For example, a buyer with $50,000 due at closing and a $2,000 earnest money deposit would bring the remaining $48,000. The deposit appears as a credit on the settlement statement, and buyers can confirm it's listed when they review their closing documents.

When a brokerage holds the deposit, it should let the title company know before closing so the buyer receives credit for the full amount. 

Earnest Money When a Contract Falls Through

When a contract is terminated before closing, the earnest money doesn't automatically go to the seller, and it doesn't automatically return to the buyer. Instead, the purchase agreement determines who receives the deposit. In most cases, that depends on the contract's contingencies, which are conditions that must be met for the sale to move forward, such as the buyer securing financing.

For example, a purchase agreement may dictate that the buyer gets the deposit back if their financing falls through. If the lender denies the loan, the buyer receives the earnest money. If the buyer instead decides to purchase a different home, the seller may keep the deposit.

The title company carries out the contract's terms but doesn't decide them. Before releasing any funds, Bluegrass Land Title requires a termination agreement and release signed by the buyer and seller. The signed termination agreement states how the deposit should be disbursed, and the funds are released according to those instructions. This requirement applies in every case, even when the deposit arrived before the contract did.

Sometimes the buyer and seller see the outcome differently. One side may believe a contingency applies when the other doesn't, or may be unwilling to sign the termination agreement. In these situations, Bluegrass Land Title doesn't act as a mediator. The buyer, the seller, and their agents must work through any disagreement about the termination agreement. Under the standard purchase agreement, the deposit can only be released at closing, with the written agreement of all parties, by court order, or as otherwise provided by law.

A contract that falls through doesn't always end the buyer's search for a home. When the earnest money is due back to the buyer, they don't have to wait for a refund and then submit a new deposit. If the same buyers go under contract on another property, Bluegrass Land Title can hold the deposit and transfer it to the new contract.

Agents can help by letting Bluegrass Land Title know when buyers with an existing deposit go under contract on a new property. "We try to catch it ourselves, but we don't always see that it's the same buyers," Kierra says. "If the agent lets us know, we can transfer it." A quick message from the agent keeps the deposit tied to the new contract and prevents confusion at closing.

Earnest money is the first money a buyer puts toward a home, and the purchase agreement sets the terms for how it's handled. Buyers and sellers should review the earnest money section before signing and confirm who will hold the deposit. Agents can help by keeping whoever holds the deposit informed when a contract changes or ends.

Bluegrass Land Title handles earnest money deposits every day and can answer questions at any point in a transaction. To submit a deposit, visit our earnest money deposit page. For questions about a specific transaction, contact your local Bluegrass Land Title office.

Frequently Asked Questions about Earnest Money Deposits