Are you wondering what really happens to your deposit after your offer is accepted in Sherman Oaks? You are not alone. Earnest money can feel confusing, especially when you are moving fast in a competitive Valley market. In this guide, you will learn how earnest money works in California, what is typical in Sherman Oaks, when funds are refundable, and the steps you can take to protect every dollar. Let’s dive in.
Earnest money basics
Earnest money, sometimes called a good‑faith deposit, is money you put into escrow to show the seller you are serious. It is not a fee. If the sale closes, the deposit is credited toward your purchase price and closing costs.
In California, the funds are usually held by the escrow company named in your contract, or sometimes by a broker’s trust account. Escrow follows written instructions from both parties and will not release money unless the contract allows it or both sides agree in writing.
How it works in California contracts
Where terms appear
Your purchase contract sets the deposit amount, the deadline to deliver it, who holds it, and how it can be released. In most local deals, the California Association of Realtors Residential Purchase Agreement is used.
When you deposit
Common practice is to deliver the initial deposit within 24 to 72 hours after acceptance, but your contract controls the exact timeline. Some offers call for same‑day or next‑business‑day delivery. Plan ahead so your funds can be wired or delivered on time.
Who controls release
Escrow generally needs joint written instructions from you and the seller to release funds, a court order, or a clear contract directive after a default. If there is a dispute, escrow can hold the money until it is resolved.
Typical deposit amounts in Sherman Oaks
Deposit size depends on price and how competitive the listing is. In Valley markets like Sherman Oaks, 1 to 2 percent of the purchase price is common, with higher deposits when multiple offers are in play.
Illustrative examples by local price tier:
- Lower tier condo or townhome at $600,000
- 1 percent deposit: $6,000
- 2 percent deposit: $12,000
- Typical single‑family at $1,200,000
- 1 percent deposit: $12,000
- 2 percent deposit: $24,000
- Move‑up home at $2,200,000
- 1 percent deposit: $22,000
- 2 percent deposit: $44,000
You can also make a smaller initial deposit, then increase it later or tighten timelines to strengthen your offer. Your agent can help balance competitiveness with risk.
When deposits are refundable
While your contingencies are active and you follow the contract’s notice rules, your deposit is typically refundable. Common examples include:
- Inspection issues that lead you to cancel within your inspection period.
- Loan denial under an active loan contingency before its deadline.
- A low appraisal that triggers your appraisal contingency.
- Title defects or HOA document concerns covered by your contingencies.
- A seller breach that prevents closing, such as failure to deliver clear title.
When deposits are at risk
Your deposit can be exposed if you remove protections and then back out. Risky situations include:
- You remove or waive contingencies in writing and later decide not to close.
- You miss a contingency deadline or do not give proper written notice to cancel.
- You fail to deliver the deposit on time as required by the contract.
Contract language and facts matter. Ask your agent to review dates and notices, and speak with a real estate attorney if there is a dispute.
Real‑world scenarios
- Inspection discovery: You put down $12,000 on a $1.2 million home with a 10‑day inspection period. A report reveals major foundation issues. You cancel within the period and receive a refund.
- Waived protections: To compete, you waive inspection and loan contingencies. The appraisal is low and you cannot bridge the gap. Because protections were waived, your deposit may be at risk.
- Missed deposit: Your contract requires a $10,000 deposit within 48 hours, but you never send it. The seller can cancel for buyer default and pursue remedies.
Protect your deposit: a simple checklist
Before you write the offer
- Verify funds are ready and available to wire or deliver.
- Choose a deposit amount that fits the home and competition level, often 1 to 2 percent.
- Set clear, realistic contingency deadlines for inspections, loan, appraisal, title, and HOA review.
- Specify the escrow holder, delivery method, and exact timing for the deposit.
After acceptance
- Send funds quickly and keep the escrow receipt and wire confirmation.
- Track every deadline and send required notices in writing.
- Document inspection findings, repair requests, and any credits with signed addenda.
- Do not rely on oral promises. Keep all records organized.
If issues arise
- Notify the seller and escrow in writing if you cancel under a contingency. Include your inspection report, lender denial letter, or appraisal.
- If the seller claims your deposit, involve your agent’s brokerage resources and consider consulting a real estate attorney.
- Expect escrow to hold funds until both sides agree or a legal decision is made.
Communication best practices
- Maintain a complete transaction file with all emails, reports, receipts, and signed forms.
- Confirm receipt of every important document with escrow and the other side.
- Refundable while contingencies remain is your guiding principle. Protect your dates in writing.
Timing and delivery tips in Sherman Oaks
Sellers in competitive Sherman Oaks neighborhoods often expect fast deposit delivery, usually within 24 to 72 hours after acceptance. Plan to wire funds or provide a cashier’s check per escrow’s instructions. Always follow the escrow company’s verified procedures when moving money.
Strategy for competitive offers
You can improve your offer without overexposing your deposit. Consider:
- A strong but manageable initial deposit, with an increase after certain milestones.
- Shorter, realistic contingency periods that you can meet.
- Clear proof of funds and lender strength to reassure the seller.
Well‑crafted terms can show commitment without skipping essential safeguards.
Final thoughts
Your earnest money is a powerful signal to the seller and an important part of your purchase. With the right strategy, clear timelines, and careful documentation, you can keep it protected while staying competitive in Sherman Oaks. If you want help tailoring deposit strategy to a specific home or price point, connect with Arthur Aslanian for local guidance backed by 25+ years of Valley experience.
FAQs
How much earnest money is typical in Sherman Oaks?
- In many Valley transactions, buyers put down 1 to 2 percent of the purchase price, with higher deposits used when competition is strong.
Who holds my earnest money in Los Angeles County?
- The escrow company named in your contract typically holds the funds and follows written instructions from both parties.
When can I get my deposit back if I cancel?
- If you cancel within active contingencies and follow the contract’s written notice rules, the deposit is generally refundable.
What happens if I remove contingencies and back out?
- Once you remove protections in writing, backing out may be a breach that puts your deposit at risk, depending on contract terms and facts.
How fast do I need to deliver the deposit?
- Many contracts call for delivery within 24 to 72 hours after acceptance, but your agreement controls the exact timing.
Can escrow release my deposit without my approval?
- Escrow usually needs joint written instructions, a clear contract directive after default, or a court order to release funds.
