What Is Earnest Money? Sunnyvale Buyers Guide

Heard you need to put down tens of thousands of dollars to compete for a Sunnyvale home? You are not alone if earnest money feels confusing or risky. The good news is that when you understand how it works, you can use it to strengthen your offer while protecting your budget. In this guide, you will learn what earnest money is, how much buyers in Sunnyvale typically put down, when it is refundable, and smart ways to structure your deposit. Let’s dive in.

Earnest money basics

Earnest money, also called an earnest money deposit or EMD, is a good‑faith deposit you make when you enter a purchase contract. It shows the seller you are serious. A neutral escrow or title company typically holds the funds until closing or release under the purchase agreement.

Your deposit is not an extra fee. If you close, it is credited toward your down payment and closing costs on your final escrow statement. The amount and handling are negotiated and spelled out in the California Association of Realtors Residential Purchase Agreement.

Is earnest money required in California?

There is no law that requires an earnest money deposit. In practice, it is customary and often expected in competitive markets like Sunnyvale. The size, timing, and handling are part of your offer terms and must be agreed to in the contract.

Who actually holds the money?

In most Sunnyvale transactions, a licensed escrow or title company holds the deposit in a trust account and follows the written escrow instructions in your contract. Less commonly, a licensed broker’s client trust account may hold it. Proper handling and accounting are required by California regulations.

Typical amounts in Sunnyvale

Sunnyvale sits within Silicon Valley, where home prices are high compared to many other parts of the state. This means even standard percentage ranges add up to large dollar amounts.

• In a balanced market, buyers often offer 1 to 3 percent of the purchase price.
• In competitive or multiple‑offer situations, it is common to see 3 to 5 percent or a large fixed dollar deposit, for example 25,000 to 100,000 dollars or more.
• Some buyers use a smaller initial deposit with a larger second deposit due after certain contingencies are removed. This is negotiable and must be written into the contract.

Quick example

On a 1,500,000 dollar Sunnyvale home:

• 1 percent EMD equals 15,000 dollars
• 3 percent EMD equals 45,000 dollars
• 5 percent EMD equals 75,000 dollars

Market conditions move fast. The right number for you depends on competition, seller expectations, your financing, and which contingencies you include or waive.

When your deposit is refundable

Whether you get your deposit back depends on your contract contingencies and deadlines. If you cancel for a contract‑approved reason within the agreed time, your deposit is typically returned.

Common refundable scenarios

• Inspection contingency. You cancel within the inspection period for an allowed reason, such as unsatisfactory results or inability to agree on repairs.
• Financing contingency. You are unable to obtain loan approval within the contingency period and cancel following the contract procedures.
• Appraisal contingency. The appraisal comes in below the purchase price, and you cancel within the allowed window when you cannot resolve the shortfall.
• Other negotiated contingencies. For example, a sale‑of‑home contingency or a contingency specific to your situation, as outlined in the contract.

The most important point is timing and documentation. You must follow the purchase agreement notice and cancellation procedures exactly to preserve your refund rights.

When your deposit is at risk

Your earnest money becomes at risk once you remove or waive protections and then cancel without an allowed reason.

Situations that put your EMD at risk

• You remove or waive contingencies. If you later back out without a contract‑approved reason, the seller may seek your deposit and other remedies allowed by the contract.
• You miss deadlines or notice requirements. Expired contingency periods and missed written notices can cost you protections.
• You default on the contract. If you fail to close without a permitted exit, the seller may claim breach. The standard California purchase agreement includes optional liquidated damages language that can allow the seller to accept the deposit as damages in many cases, subject to reasonableness.

How releases and disputes work

Escrow usually needs joint written instructions from both parties to release funds. If there is a disagreement, the money can remain in escrow until the parties reach a mutual release, an arbitrator decides, or a court orders disbursement, consistent with the contract’s dispute procedures.

How earnest money works in Sunnyvale transactions

You will deliver the deposit according to the instructions in your accepted purchase agreement. Funds are typically delivered to the escrow or title company by cashier’s check, wire, or approved electronic transfer. Always confirm acceptable methods and get a written receipt.

Your contract will set the contingency periods, which are critical to your refund rights. In California practice, buyers and sellers negotiate these windows. Common ranges you may see include roughly 7 to 17 days for general inspections and roughly 17 to 21 days for loan review, although these vary by deal. Pay close attention to the exact deadlines in your contract.

At closing, your earnest money is applied toward your down payment and closing costs. You will see the credit on your closing statement from escrow.

Strategies to strengthen your offer and protect yourself

There is no one‑size‑fits‑all approach. Your plan should reflect market conditions, your risk tolerance, and your financing.

Decide how much to offer

• Competitive offer. Consider 2 to 5 percent or a significant fixed dollar amount to signal commitment in a multiple‑offer situation.
• Balanced offer. Consider 1 to 3 percent with standard contingencies when the market is less heated or the listing has been on the market longer.
• Protection‑first approach. Use a smaller deposit with strong contingency periods if you need more time for inspections or loan approval.

Structure your deposit and contingencies

• Use a staggered deposit. Start with a smaller initial deposit, then add a second deposit after removing contingencies. This can limit early exposure while still showing seriousness later.
• Pair price strategy with deposit. If you use an escalation clause to compete on price, combine it with a meaningful deposit and a clear, reasonable timeline to close.
• Be cautious with waivers. Waiving inspection or appraisal can make your offer stand out, but it significantly increases your risk of losing the deposit if unexpected issues arise.

Manage timelines and documentation

• Calendar every deadline. Track inspection, appraisal, loan, and any other contingency periods from day one.
• Follow notice rules exactly. Use the contract forms your agent provides to extend, remove, or cancel within the required windows.
• Keep records. Save inspection reports, lender communications, and any written notices that support your decisions.

When to bring in professionals

• Ask your agent to walk you through each contingency and deadline before you write the offer.
• If you are considering waiving protections or making a large deposit, consult your agent and, when needed, a real estate attorney.

Common pitfalls to avoid

• Offering a large deposit without a plan. Bigger is not always better. Make sure the amount matches your risk tolerance and your contract protections.
• Missing a deadline by a day. Even a short delay can change your rights. Build buffer time into your calendar and respond early.
• Assuming escrow will release funds quickly. Escrow follows the contract. If there is a dispute, funds can be held until both sides agree in writing or a decision is made by arbitration or court per the agreement.

The bottom line for Sunnyvale buyers

Earnest money is a tool. In Sunnyvale’s competitive market, it can help your offer rise to the top, but only if you understand how and when it is refundable, and how your contingencies work. Match your deposit size to the market, protect yourself with clear timelines and notices, and use structure, not just size, to send the right signal to sellers.

Buying in Sunnyvale is fast‑moving. You deserve a team that helps you set the right deposit, keep deadlines on track, and negotiate with confidence from offer through close. If you are ready to compete smart and protect your investment, connect with The Palacios Group for local guidance and a proven, team‑powered approach.

FAQs

What is earnest money in a Sunnyvale home purchase?

• It is a good‑faith deposit you put down when your offer is accepted, held by escrow or a broker’s trust account, and credited to your down payment and closing costs at closing.

How much earnest money do Sunnyvale buyers usually put down?

• In a balanced market, 1 to 3 percent is common. In multiple‑offer scenarios, 3 to 5 percent or a large fixed dollar amount is often used to strengthen the offer.

When can I get my earnest money back in California?

• If you cancel within your contract’s contingency periods for an allowed reason, such as inspections, loan approval, or appraisal issues, your deposit is typically refundable.

When is my earnest money at risk in Sunnyvale?

• Once you remove or waive contingencies and then cancel without an allowed reason, or if you miss deadlines or default, the seller may seek your deposit under the contract.

Who releases the deposit if the deal falls apart?

• Escrow usually needs joint written instructions from both parties. If there is a dispute, funds may be held until there is a mutual release, arbitration award, or court order.