You finally found a Nashville home you love, and your agent says it’s time to put down earnest money. If you’re new to Middle Tennessee or buying your first place, this step can feel confusing. You want a strong offer without risking more cash than needed. In this guide, you’ll learn exactly what earnest money is, typical Nashville amounts, when it’s refundable, and how to protect it from contract to closing. Let’s dive in.
What earnest money is
Earnest money is your good‑faith deposit that shows the seller you are serious once your offer is accepted. It is separate from your down payment and closing costs, though it is usually applied to them at closing. If the sale closes, it is not an extra fee.
In Nashville practice, the deposit normally goes into an escrow or trust account held by a neutral third party, such as a title company, a closing attorney, or sometimes the listing broker. Your purchase agreement will name the escrow holder and explain how and when the funds are handled.
Most contracts require you to deliver earnest money shortly after acceptance, often within 24 to 72 hours. Always follow the timing written in your contract.
Typical amounts in Nashville
There are two common ways to set your deposit:
- Percentage of the purchase price, often around 1% as a starting point
- Flat dollar amount, which can vary by price range and market conditions
Useful ranges for Davidson County buyers:
- Lower‑priced homes (under $300,000): $1,000 to $5,000, or about 0.5% to 1.5%
- Mid‑priced homes ($300,000 to $700,000): $3,000 to $10,000, around 1% common
- Higher‑priced homes (over $700,000): usually 1% or more, often $10,000+
Illustrative examples:
- $350,000 home: 1% is $3,500; 2% is $7,000
- $600,000 home: 1% is $6,000; 1.5% is $9,000
- $900,000 home: 1% is $9,000; 1.5% is $13,500
Nashville has micro‑markets with different expectations. In areas that have been highly competitive, such as The Gulch, 12South, East Nashville, or Germantown, buyers sometimes offer larger deposits or a higher percentage. In slower periods, a smaller deposit may be acceptable.
When it’s refundable
Refundability is controlled by your written purchase contract. If you follow the contract and exercise a contingency properly, your earnest money is typically refundable. Common protections include:
- Inspection contingency: You can cancel within the inspection period per the contract if the findings are not acceptable to you. When done correctly, the deposit is usually refundable.
- Financing contingency: If you cannot obtain the agreed financing and terminate under the contingency terms, the deposit is usually refundable.
- Appraisal contingency: If the appraisal comes in low and the contract allows you to cancel, your deposit is typically refundable if you terminate per the clause.
- Title or HOA review contingencies: You may be able to cancel for unacceptable title issues or HOA restrictions if allowed by the contract language.
- Seller default: If the seller breaches the agreement, you may be entitled to your deposit back and possibly other remedies as the contract allows.
Always track deadlines and send notices exactly as the contract requires.
When a seller can keep it
A seller may keep the deposit if you breach the agreement outside of contingency protections. For example, if you simply walk away after deadlines pass and contingencies are released, you could forfeit the deposit.
Many Tennessee purchase agreements include a liquidated damages provision or a similar clause that describes what happens if a buyer defaults. Your specific contract will control. If a dispute arises, the escrow holder will generally hold the funds until both parties sign a release or a court orders a distribution.
How deposit size impacts your offer
A larger earnest money deposit can strengthen your offer because it signals commitment and lowers the seller’s perceived risk. In multiple‑offer situations, a higher deposit can help you stand out when price and terms are similar.
Some buyers offer a portion that becomes nonrefundable after certain dates to further boost their offer. This can be effective, but it also increases risk if your situation changes or the property does not appraise. Consider your liquidity and risk tolerance before increasing the deposit or limiting contingencies.
Remember, earnest money is just one part of the package. A strong preapproval, a clean financing profile, reasonable timelines, and clear terms can matter as much or more than deposit size. In historically hot parts of Nashville, sellers may expect both competitive pricing and a strong deposit signal. In slower periods, financing certainty and clean terms often carry the most weight.
Budget for earnest money
Plan ahead so you are not scrambling once your offer is accepted.
- Set aside about 1% of your target purchase price as a starting point.
- Adjust up if you are shopping in competitive neighborhoods or at higher price points.
- Keep this money separate from your down payment and closing cost funds until closing.
- Budget for inspection fees and any extra deposits you might offer, such as appraisal gap coverage or a portion that becomes nonrefundable.
Protect your deposit
Use these steps to keep your earnest money safe from offer to closing.
- Get the right contingencies: Include inspection, financing, and appraisal contingencies if you need those protections. Make sure timelines are realistic.
- Track deadlines: Know your inspection period, financing and appraisal deadlines, and any dates when contingencies must be released. Act before they expire.
- Follow delivery instructions: Pay by the method listed in the contract, such as check, wire, or cashier’s check. Get a written receipt from the escrow holder and keep proof of transfer.
- Prevent wire fraud: If wiring funds, call the title company using a known, trusted phone number to confirm instructions before sending money.
- Keep records: If you terminate under a contingency, follow the notice requirements exactly and keep copies of emails, inspection reports, or lender letters.
- Get advice if there is a dispute: If the seller claims a breach and intends to keep the deposit, review the contract and consider legal counsel. Local title companies can explain typical disbursement steps.
Who holds it and when you pay
In Nashville, earnest money is commonly held by a title company, an escrow agent, a closing attorney, or sometimes the listing broker. Your contract will name the escrow holder and set the rules for the account.
Delivery typically happens quickly after acceptance, often within 24 to 72 hours. Pay exactly as the contract states and secure a written receipt. If you wire funds, verify instructions directly with the escrow holder by phone before sending money.
Action checklist
Before you shop:
- Get a full preapproval, not just a prequalification.
- Set aside a realistic earnest money budget based on your price range.
- Discuss neighborhood competitiveness and likely deposit expectations with your agent.
When you make an offer:
- Choose a deposit amount that fits your budget and the market.
- Confirm the named escrow holder and delivery method in the offer.
- Include contingencies that match your needs and risk tolerance.
After acceptance:
- Deliver funds on time and get a receipt.
- Schedule inspections right away and track your contingency deadlines.
- Communicate quickly if you need to request repairs or terminate under a contingency.
Questions to ask your agent or title company
- Where will my earnest money be held and under what account type?
- How long do I have to deliver the funds after acceptance?
- What payment methods are accepted, and how do I get a written receipt?
- What is the process to release funds if I terminate under a contingency?
- How are disputes handled if the parties disagree?
- If wiring, how do I safely verify instructions and confirm receipt?
Final thoughts
The right earnest money strategy helps you compete in Nashville while protecting your budget. Aim for a deposit that supports a strong offer without taking on unnecessary risk, and let your contract timelines guide every step. If you are weighing a larger or partly nonrefundable deposit, talk through the trade‑offs before you commit.
If you want local, hands‑on guidance from contract to closing, reach out to Camille Birkhead. We are here to help you choose the right deposit, navigate contingencies, and close with confidence.
FAQs
How much earnest money should I offer in Nashville?
- A common starting point is about 1% of the purchase price. Increase it for higher price points or more competitive neighborhoods, and decide with your agent based on recent local offers.
Is earnest money refundable after an inspection in Tennessee?
- If your contract includes an inspection contingency and you cancel within the inspection period as written, the deposit is normally refundable. Missing the deadline can put your deposit at risk.
Does earnest money count toward my down payment at closing?
- Yes. It is typically applied to your down payment and closing costs at closing, so it is not an extra fee if the sale completes.
Who holds earnest money in Nashville and how do I pay?
- Usually a title company, escrow agent, closing attorney, or sometimes the listing broker holds it. You will deliver funds as the contract instructs, such as by check, wire, or cashier’s check.
What happens if there is a dispute about my deposit?
- The escrow holder typically requires a mutual release or a court order before disbursing funds. Review the contract language and consider legal advice if you cannot resolve it quickly.
Can a bigger deposit make my offer stronger in Nashville?
- Yes. A larger deposit signals commitment and can help in multiple‑offer situations, but it ties up more cash and may increase risk if you reduce contingencies. Balance offer strength with protection.
