Buying your first home in Northbrook comes with a lot of new terms, and “earnest money” is one of the big ones. It can feel intimidating to put thousands of dollars on the line before you even close. You want to make a strong offer without risking more than you should. In this guide, you’ll learn how earnest money works in Illinois, what’s typical on the North Shore, how contingencies protect you, and the steps to keep your deposit safe. Let’s dive in.
What earnest money is
Earnest money, sometimes called a good‑faith deposit, is a buyer’s initial cash deposit that shows you are serious about purchasing the home. If the sale closes, it becomes part of your funds at closing, such as your down payment or closing costs.
It also sets financial consequences if a buyer defaults after their protections are removed. The purchase contract controls how earnest money is handled, including when it is refundable and when a seller may claim it.
Typical amounts in Northbrook
There are two common ways to set an earnest money amount:
- A fixed number, often a few thousand dollars, such as $1,000 to $5,000 for lower‑priced homes or initial offers.
- A percentage of the purchase price, often about 1% to 3% in many markets. Higher‑priced homes or competitive situations can push deposits higher than 3%.
On the North Shore, competition can run above average. Expect sellers to look for a deposit that signals commitment. Work with your agent to set an amount that balances competitiveness with cash preservation, especially if multiple offers are likely.
Factors that raise or lower the deposit
- Market conditions. Multiple offers usually mean higher earnest money.
- Price point. Percentage‑based deposits scale up with higher home prices.
- Seller preferences. Some listing agents suggest a target amount or want a check with the offer.
- Buyer strength. Solid pre‑approval, clean contingencies, and flexibility can support a stronger deposit.
When earnest money is due
In Illinois and across the Chicago area, earnest money is typically due very quickly. Contracts often require delivery at acceptance or within a short window, commonly 24 to 72 hours, or within a set number of business days. The exact timing lives in the contract you sign.
Sellers expect quick delivery. Delays can weaken your offer or be viewed as a failure to perform under the contract. Have your funds ready to go at acceptance so you can meet the deadline without stress.
Where the money is held
Your contract will name the escrow holder and the deposit instructions. In Illinois, these are common:
- Title or closing company escrow accounts, which are standard in many transactions.
- Attorney trust accounts, which some deals use for escrow.
- Brokerage trust accounts, which follow state trust‑account rules. Many brokerages promptly forward funds to the title company.
Illinois rules and industry practice require licensees to safeguard client funds in designated trust or escrow accounts. You will receive a receipt or confirmation when your deposit is recorded.
Lender documentation and source of funds
Mortgage lenders verify where your earnest money came from. Plan for the following:
- Bank statements that show the money in your account and the deposit or wire to escrow.
- Gift letters and transfer proof if someone is helping with funds. Different loan programs set rules for acceptable sources and gifts.
- Timing and “seasoning” of funds. Lenders often want to see money in your account before it is wired. If funds come from a third party, they will request documentation.
Loans do not fund earnest money. It must come from your own verified funds or an approved gift. Keep every record: check copies, wire confirmations, escrow receipts, and email confirmations.
Contingencies and refundability
Contingencies are your safety nets. If you follow the contract rules and a contingency is not satisfied, you can usually cancel and recover your earnest money.
Common contingencies in Illinois include:
- Inspection: a set window, often 5 to 14 days, to inspect and negotiate or cancel.
- Financing: a deadline to secure a loan commitment, often around 21 to 30 days.
- Appraisal: protection if the appraisal is below the purchase price.
- Title: time to review title and raise objections.
- Sale of buyer’s home: less common in competitive markets, but it exists.
While a contingency is active, you can cancel within the deadline and follow the notice rules to preserve your refund. Once you waive a contingency or let its deadline pass, that specific protection typically ends and your deposit can be at risk if you default later.
Real‑world examples
- Inspection reveals major structural issues. You cancel within the inspection window and follow the contract’s notice steps. Your earnest money is refunded.
- You waive the financing contingency, then your loan is denied later. Your earnest money may be at risk because you removed the protection.
- Appraisal comes in low, and the seller will not adjust the price. If you have an appraisal contingency and act before the deadline, you can cancel and keep your deposit. If not, the risk increases.
Deadlines and notices that matter
Earnest money outcomes often hinge on timing and paperwork. Common timelines include:
- Inspection period: often 5 to 10 business days to inspect and either negotiate or give written notice to cancel.
- Financing commitment: often 21 to 30 days to deliver a loan commitment or cancel per the contingency.
- Appraisal: tied to financing or its own deadline, with prompt written objection if value falls short.
Contracts usually require written notice and specific delivery procedures to cancel under a contingency. Missing a deadline or failing to send proper notice can jeopardize your refund.
Disputes and seller remedies
If a buyer defaults after protections expire, many contracts allow the seller to keep the earnest money as liquidated damages. Sellers can also pursue other remedies under the contract, like seeking additional damages or specific performance.
When there is a dispute over earnest money, escrow holders in Cook County typically keep funds in escrow until they receive written mutual instructions, an arbitration award, or a court order. A typical sequence looks like this:
- Seller demands release of the earnest money.
- Buyer responds in writing and cites contract protections or compliance.
- Escrow holder keeps the funds until both sides agree in writing or there is a legal decision.
- If needed, one party files a claim per the contract’s dispute process.
Clear contract language, careful adherence to deadlines, and organized documentation are your best protections.
Step‑by‑step checklist for Northbrook first‑time buyers
Use this as a quick plan from offer to close:
Before you write an offer
- Determine a realistic deposit with your agent that fits the home’s price and market competition.
- Confirm you have liquid funds available and gather bank statements or gift letters.
- Ask your lender about program rules for gift funds and documentation.
When you submit the offer
- State the amount and timing for earnest money in your offer, such as “$X to the title company within 2 business days of acceptance.”
- Name the escrow holder in the contract. Title company escrow is common on the North Shore.
- Set practical contingency deadlines for inspection, financing, and appraisal.
During the contract period
- Schedule inspections right away to stay within your window.
- Provide your lender with requested docs early to hit the commitment date.
- Keep all receipts, wire confirmations, and escrow letters. Save a clean email trail for acceptance and deposit.
If you cancel under a contingency
- Follow the contract’s written notice process and deliver it to all required parties before the deadline.
- Ask the escrow holder to confirm the refund in writing and keep the confirmation.
If the seller claims default
- Respond in writing and reference the contract sections that protect you.
- Expect the escrow holder to retain funds until both sides agree or a legal decision is made.
Sample timeline from offer to close
- Day 0: Offer accepted. You deliver earnest money within 24 to 72 hours or as stated in the contract.
- Days 1–10: Inspection period, for example 7 days. You inspect and either request repairs or cancel within the window.
- Days 21–30: Financing commitment date. You receive your loan commitment or cancel per the financing contingency.
- Closing: Earnest money applies to your down payment or closing costs, and remaining funds are settled.
Money planning tips
- Budget for more than the deposit. You will also have inspection fees, possible appraisal fees, and closing costs.
- Treat earnest money as a near‑term cash outlay. Even if refundable under contingencies, you need it readily available at acceptance.
- In tight markets, consider a stronger deposit to help your offer stand out, balanced with protections that keep you safe.
Wrap‑up: Confident next steps
When you understand earnest money, you can write a competitive Northbrook offer and protect your cash at the same time. Set the right amount for the property and market, meet your deadlines, keep excellent records, and use your contingencies with care. With a clear plan, your deposit becomes a tool that supports your offer, not a source of stress.
Ready for local, step‑by‑step guidance on your North Shore home search? Talk with our team about your timeline and budget, and we will help you set smart contingencies and an earnest money plan that fits. Get your free home valuation from Unknown Company to plan your next move.
FAQs
How much earnest money do Northbrook buyers typically put down?
- Many buyers use a few thousand dollars or about 1% to 3% of the price, adjusted higher in competitive situations and on higher‑priced homes.
When is earnest money due in Illinois home purchases?
- It is usually due at acceptance or within a short window, commonly 24 to 72 hours or within a set number of business days, as stated in the contract.
Who holds earnest money in a Northbrook transaction?
- Title companies are common escrow holders, but attorney trust accounts or brokerage trust accounts are also used depending on the contract.
Is earnest money refundable if a deal falls through in Illinois?
- It is generally refundable if you cancel within an active contingency and follow the contract’s notice rules; once protections are waived or expire, the risk increases.
How does a low appraisal affect my earnest money?
- With an appraisal contingency, you can usually renegotiate or cancel and recover your deposit if you act before the deadline; without it, your deposit may be at risk.
What happens if there is an earnest money dispute in Cook County?
- The escrow holder typically keeps funds until both parties give written instructions or an arbitration award or court order directs release.
Can earnest money be a gift for first‑time buyers?
- Yes, but lenders require documentation such as a gift letter and proof of transfer, and loan programs set rules on acceptable sources.
