What Is Earnest Money and Who Holds It in Indiana?
Missy Horner
President, Empire Title Services | 20+ Years Experience
Quick Answer: Earnest Money in Indiana
What it is: A good-faith deposit showing the seller you're serious about buying
Typical amount: 1%–3% of the purchase price
Who holds it: Usually the title company's escrow account (specified in the contract)
At closing: Applied toward your down payment or closing costs
Questions? Call Empire Title: (765) 935-9966
You found the house. You made an offer. The seller is interested. Now your agent mentions earnest money — and suddenly you need to write a check before you even know if you're getting the house.
Here's exactly how earnest money works in Indiana, who holds it, and what happens to it under different scenarios.
What Is Earnest Money?
Earnest money — sometimes called a good-faith deposit — is money a buyer puts up when making an offer on a home. It tells the seller: "I'm serious. I'm not wasting your time."
In Indiana, the amount is negotiable, but 1%–3% of the purchase price is the norm. On a $250,000 home, that's roughly $2,500 to $7,500. In competitive markets, some buyers offer more to make their offer stand out.
Who Holds Earnest Money in Indiana?
The purchase contract specifies who holds the earnest money. In Indiana, it's most commonly one of two parties:
Title Company Escrow Account
Most common in Indiana. Empire Title holds funds in a dedicated escrow account separate from operating funds — fully protected until closing.
Real Estate Broker Escrow Account
The buyer's or seller's agent's brokerage may hold the deposit. The broker has a legal obligation to keep these funds separate from business accounts.
When Do You Get Earnest Money Back?
Whether a buyer can recover their deposit depends on the contract contingencies. Contingencies are conditions that must be met for the sale to proceed — if they aren't met, the buyer can typically walk away with their money.
Inspection Contingency
If the inspection reveals serious issues and the buyer exercises their inspection contingency, they can cancel and get their deposit back.
Financing Contingency
If the buyer is denied financing and has a mortgage contingency in the contract, they typically get the earnest money refunded.
Appraisal Contingency
If the home appraises below the purchase price and the parties can't agree on a solution, the buyer may cancel and recover the deposit.
Buyer Backs Out Without Reason
If there's no valid contingency and the buyer simply changes their mind, the seller may be entitled to keep the earnest money as liquidated damages.
Disputed Earnest Money Stays in Escrow
If the buyer and seller disagree about who gets the earnest money, the title company or broker holds the funds in escrow until both parties agree or a court decides. The escrow holder does not take sides — the funds stay put until the dispute is resolved.
What Happens to Earnest Money at Closing?
If the deal closes, the earnest money doesn't disappear — it gets applied toward what you owe at closing. The Closing Disclosure will show the deposit as a credit against your total funds due.
Frequently Asked Questions
How much earnest money is typical in Indiana?
In Indiana, earnest money typically ranges from 1% to 3% of the purchase price. On a $200,000 home, that's $2,000 to $6,000. The amount is negotiable — in competitive markets, buyers sometimes offer more to stand out from other offers.
Who holds earnest money in Indiana?
In Indiana, earnest money is most commonly held in the escrow account of the title company handling the closing. It can also be held by a real estate broker's escrow account. The purchase contract specifies who holds the funds.
Can I get my earnest money back if the deal falls through in Indiana?
It depends on the reason. If the deal falls through due to a contingency in the contract — such as a failed inspection, financing denial, or failed appraisal — the buyer typically gets the earnest money back. If the buyer backs out without a valid contingency, the seller may be entitled to keep it.
When is earnest money released at closing?
At closing, the earnest money held in escrow is applied toward the buyer's closing costs or down payment. It's already been collected and counts as part of the total funds owed — it won't be a surprise extra cost on closing day.
Missy Horner
President, Empire Title Services
With over 20 years of experience in Indiana and Ohio real estate closings, Missy Horner leads Empire Title Services in providing expert title insurance, property searches, and closing coordination. A trusted resource for real estate agents, lenders, and homeowners throughout Wayne, Randolph, and Henry counties.