Understanding Earnest Money in Connecticut: A Legal Perspective
- abbyandrews74
- Aug 19
- 3 min read
Buying or selling a home is one of the biggest financial transactions most people will ever make. Along the way, you’ll hear terms like earnest money, real estate deposits, or good faith deposits. But what exactly do they mean, and how do they work under Connecticut real estate law?
At Tap2Close Legal, we help homebuyers, sellers, and real estate professionals navigate these questions every day. In this guide, we’ll break down what earnest money is, why it matters, the unique rules in Connecticut, and how disputes are typically handled.
What Is Earnest Money?
Earnest money is a deposit made by a buyer to show they are serious about purchasing a property. Think of it as a sign of commitment—it reassures the seller that the buyer isn’t just “window shopping” but intends to follow through with the deal.
Amount: In Connecticut, earnest money deposits often range from 1% to 5% of the purchase price, though the exact amount is negotiable.
Timing: The deposit is usually paid when the buyer and seller sign the purchase agreement.
Where It Goes: The money is typically held in an attorney’s trust account or a brokerage escrow account until closing.
If the deal goes through, the deposit is applied toward the buyer’s closing costs or down payment.
Why Earnest Money Matters
For Buyers
It strengthens your offer in a competitive market.
It shows sellers you’re committed, giving you an edge when multiple offers are on the table.
For Sellers
It provides a level of protection—if the buyer walks away without a valid reason, you may be entitled to keep the deposit.
For Real Estate Professionals
It helps facilitate smoother transactions by aligning incentives for both buyers and sellers.
Connecticut-Specific Legal Considerations
Every state has its own rules about how earnest money is handled, and Connecticut is no exception. Here are some key points under Connecticut real estate law:
Escrow Requirements
In Connecticut, earnest money (or any real estate deposit) must be kept in a separate escrow account, managed by either a licensed real estate broker or an attorney. This ensures the funds are secure and not mingled with operating funds.
Contingencies Matter
Most purchase agreements include contingencies—conditions that must be met for the deal to proceed. Common examples:
Financing contingency (buyer must secure a mortgage)
Inspection contingency (property must pass inspection or repairs must be negotiated)
Appraisal contingency (property must appraise at or above the purchase price)
If a contingency isn’t met, buyers usually have the right to back out and get their earnest money refunded.
When Disputes Arise
Earnest money disputes typically happen when:
A buyer backs out without a valid contingency.
A seller claims the buyer failed to meet obligations under the contract.
Both parties disagree about whether a contingency was satisfied.
In these cases, the escrow agent (attorney or broker) cannot release the funds unless both sides agree—or a court orders release. This is where having a law firm like Tap2Close Legal involved early can save time, money, and stress.
Common Earnest Money Dispute Scenarios
Scenario 1: Financing Falls Through
If the buyer can’t secure a mortgage and the contract had a financing contingency, they usually get their deposit back. Without this clause, the seller may keep the money.
Scenario 2: Inspection Issues
If the home inspection reveals major problems and the contract allows the buyer to cancel, the deposit is refunded. If not, disputes can arise.
Scenario 3: Cold Feet
If the buyer simply changes their mind and walks away, the seller often has the right to keep the deposit.
How Tap2Close Legal Helps
At Tap2Close Legal, we provide clear, proactive guidance for buyers, sellers, and agents when it comes to earnest money in Connecticut. Our role often includes:
Drafting and reviewing purchase agreements to avoid future disputes
Explaining contingencies in plain language
Holding deposits securely in escrow
Mediating disputes before they escalate to litigation
Our goal is always to protect your interests while keeping the transaction moving smoothly.
Key Takeaways
Earnest money in Connecticut is a good faith deposit that shows commitment in a real estate transaction.
Deposits are held in escrow by an attorney or broker under Connecticut real estate law.
Contingencies in the purchase agreement play a major role in whether buyers can get their deposit back.
Disputes can and do happen—but with the right legal guidance, they can be resolved efficiently.
Ready to Protect Your Real Estate Transaction?
Whether you’re a homebuyer putting down earnest money, a seller reviewing offers, or a real estate agent managing deals, understanding the legal side of real estate deposits in Connecticut is crucial.
At Tap2Close Legal, we’re here to help. Our team combines legal expertise with tech-enabled tools to make your real estate transactions seamless and secure.
Have questions about earnest money in Connecticut or other aspects of your closing? Contact Tap2Close Legal today and let us guide you every step of the way.