Earnest money is a good-faith deposit — typically 1% to 3% of the purchase price in Indiana — that a buyer puts down within a few days of a seller accepting their offer. It's held in escrow, usually by the title company or the buyer's brokerage trust account, until closing, where it's credited toward the buyer's down payment and closing costs. If the buyer backs out for a reason the purchase agreement actually covers — like a failed inspection or denied financing — they typically get it back. If they walk away for a reason the contract doesn't protect, the seller can typically keep it. Here's how each piece of that actually works in an Indiana transaction.

How Much Earnest Money Do Indiana Buyers Typically Put Down?

There's no state-mandated minimum — the amount is negotiated between buyer and seller and written into the purchase agreement. In practice, Indiana buyers commonly put down somewhere between 1% and 3% of the purchase price. On a $400,000 Westfield home, that's roughly $4,000 to $12,000. In a competitive listing with multiple offers, buyers sometimes offer a larger earnest deposit as a signal they're serious, though a bigger deposit alone doesn't guarantee your offer wins — price, terms, and contingencies matter too.

Where Does the Money Actually Go? (Escrow)

Earnest money doesn't go to the seller directly, and it isn't held by your agent personally. It's deposited into a neutral, third-party escrow account — most commonly managed by the title company handling the closing, though in some transactions it's held in the listing or buyer's brokerage's escrow/trust account instead. Either way, the funds sit untouched until closing (or until the deal falls through and both sides agree on where they go), which protects both the buyer and seller from either party accessing the money unilaterally.

When Is Earnest Money Due After an Accepted Offer?

The purchase agreement itself specifies the deadline, but a common window in Indiana deals is one to three business days after the seller accepts the offer. Buyers should have funds ready to wire or deliver promptly once a deal is under contract — a missed earnest money deadline can, in some contracts, be treated as a breach of the agreement, so it's worth confirming the exact timeline with your agent the moment an offer is accepted.

When You Get It Back — and When You Don't

This is the part buyers care about most. Standard Indiana purchase agreements typically include contingencies — inspection, financing/mortgage approval, and sometimes appraisal — that give the buyer a defined window to walk away and get their earnest money back if something doesn't check out. Once those contingency deadlines pass, though, backing out without a contract-covered reason generally means the seller is entitled to keep the earnest money as compensation for taking the home off the market. This is exactly why waiving contingencies to make an offer more competitive is a real financial risk, not just a formality — talk it through carefully with your agent before doing it.

How Earnest Money Applies at Closing

Assuming the deal closes normally, earnest money isn't an extra cost on top of your down payment — it's credited toward what you owe. Your closing disclosure will show the earnest deposit as a credit, reducing the additional cash you need to bring to the closing table. In other words, it's money you were always going to need for the purchase; it's just collected earlier as a show of commitment.

Frequently asked questions

Is earnest money required to buy a house in Indiana?
It's not legally required by the state, but in practice almost every competitive purchase agreement in the Indiana market includes an earnest money deposit — sellers generally expect it as proof the buyer is serious.

What happens to my earnest money if my financing falls through?
If your purchase agreement includes a financing contingency and you're denied a mortgage within the contingency period, you're typically entitled to a full refund of your earnest money.

Can a seller keep my earnest money if I just change my mind?
Generally yes, if you back out after your contingency deadlines have passed and the contract doesn't otherwise protect you. This is why it's important to understand your contingency windows before you go under contract.

Who actually holds my earnest money — my agent, or the title company?
Neither agent holds it personally. It sits in a neutral escrow account, most often managed by the title company handling your closing, or sometimes a brokerage's trust account, per the terms of your purchase agreement.

Is earnest money the same as a down payment?
No, but it counts toward it. Earnest money is an early deposit that gets credited against your total funds due at closing, which includes your down payment and closing costs.

For more on the buying process, see our guides to Hamilton County, IN Real Estate, Buyer's Agent in Westfield, IN, and our companion posts on mortgage dos and don'ts and what closing costs to expect.

Earnest money is one of the first real financial decisions you'll make in a home purchase, and getting the contingency terms right matters just as much as the dollar amount. If you're buying in Westfield, Carmel, Noblesville, or anywhere in Hamilton County, we'll walk you through exactly what to offer and how to protect your deposit before you write an offer.

Jason Kraus, Broker/Owner, REMAX Advanced Realty — MOVE Group, Hamilton County's dedicated local team headquartered in Westfield.