What Is Earnest Money in Tennessee Real Estate?

Making an offer on a Nashville home and hearing the term “earnest money”? You are not alone. Many first-time and relocating buyers wonder how this deposit works, what is typical in Davidson County, and how to protect it. In a few minutes, you will learn what earnest money is, how it moves through a Tennessee transaction, what amounts are common in Nashville, when it is refundable, and what to do if there is a dispute. Let’s dive in.

Earnest money basics

What earnest money is

Earnest money, sometimes called an earnest money deposit or good-faith deposit, is the money you put down after your offer is accepted to show you intend to close. It is not your down payment. At closing, it is usually credited toward your down payment or closing costs.

Why it matters in Nashville

For sellers, earnest money shows you are committed and helps offset the risk if a buyer unjustifiably backs out. For you as a buyer, the amount you offer can strengthen your position, especially in competitive Nashville neighborhoods. Your contract will spell out how the deposit is handled, when it is refundable, and what happens if either party defaults.

How it works in Tennessee

Who holds the funds

In Tennessee, earnest money is typically held in an escrow account managed by one of these parties:

• The listing broker’s trust or escrow account
• The buyer’s broker’s trust account
• A title company
• A closing attorney or escrow agent

Escrow holders follow fiduciary rules. Commingling client funds with operating funds is prohibited, and disbursement must follow the contract.

When you deposit

Your purchase contract sets the deadline, often within 24 to 72 hours after the offer is accepted. You will see accepted delivery methods in the contract, such as a personal or cashier’s check, a wire transfer to the escrow account, or delivery directly to the closing agent.

How it applies at closing

At closing, the escrow holder credits your earnest money toward your required funds. You will see it listed on the settlement statement as a credit applied to your down payment and/or closing costs.

Your paperwork

You should receive a receipt confirming the deposit amount, date, who paid, who holds the funds, and which contract it references. Your purchase agreement will also include instructions for handling and releasing the escrow if the deal changes.

How much to offer in Nashville

Typical ranges

There is no fixed rule in Tennessee. Nationally, a common range is about 1 to 3 percent of the purchase price. In the Nashville area, buyers often see:

• Lower-priced homes or less competitive situations: roughly 1,000 to 3,000 dollars
• A typical baseline: about 1 percent of the purchase price
• Competitive or multiple-offer situations: 2 to 5 percent, sometimes higher
• Luxury or high-value properties: larger flat amounts or higher percentages based on expectations in that segment

Local customs can vary by neighborhood, listing demand, and the type of property.

Factors that influence amount

• Competition level in your target area
• Your financing type and strength of approval
• Number and length of contingencies
• Seller preferences or norms in that submarket
• Closing speed and your proposed timeline

Strategy for competitive offers

You can improve the appeal of your offer with a stronger deposit, but balance that against risk. Pairing a larger earnest money amount with clear, well-timed contingencies helps protect you while signaling seriousness. If a seller requests more earnest money mid-transaction, treat it as a negotiation point and consider whether adjusting timelines or other terms could achieve the same goal with less risk.

Refunds and protections

Contingencies that protect you

Earnest money is typically refundable if you properly exercise a contingency within the contract deadlines. Common protections include:

• Inspection contingency: Cancel within the inspection period if results are unacceptable under the contract terms.
• Financing contingency: If your loan is denied, you can usually cancel with proper notice and required documentation.
• Appraisal contingency: If the appraisal comes in low and you cannot reach a price adjustment, you can cancel per the agreement.
• Title contingency: If title issues are found and cannot be resolved, you can cancel as outlined in the contract.
• Home-sale contingency: If included, you can cancel if you are unable to sell your current home within the agreed timeframe.

Contract timing and notice

Refund rights depend on meeting every deadline and delivering notices exactly as the contract requires. Many disputes arise from missed dates or missing paperwork. Keep written records, including inspection reports and lender communications, and follow the delivery method stated in your agreement.

When it is not refundable

You risk losing earnest money if you default without a valid contingency, miss required notice deadlines, or walk away for reasons not covered by the contract. Read your agreement carefully and ask questions before you sign.

Seller remedies and disputes

If a buyer breaches, seller remedies are guided by the contract. These can include keeping the earnest money as liquidated damages if the agreement allows, seeking actual damages, or asking a court for specific performance. Tennessee forms also outline steps for escrow release and what happens when the parties disagree.

Escrow disputes in Tennessee

Release procedures

Standard purchase agreements describe how escrow funds are released. Often, the escrow holder will disburse only when both parties agree in writing or when there is a court or arbitrator’s order.

Paths to resolve disagreements

• Mutual release: Buyer and seller sign a written release that instructs the escrow holder.
• Mediation or arbitration: Some contracts require alternative dispute resolution.
• Interpleader: The escrow holder can ask a court to decide how to distribute the funds when parties cannot agree.

Disputes are not the norm, but they can be time-sensitive. Documentation and prompt communication make resolution easier.

Duties of the escrow holder

Brokers, title companies, and closing attorneys must safeguard funds and follow the contract and state rules. Funds remain in escrow until a proper release or order is received.

Buyer checklist and timeline

Use this quick checklist to keep your deposit safe and your timeline on track:

• Before you offer

  • Discuss deposit strategy based on price point and competition.
  • Choose where funds will be held: listing broker, buyer’s broker, title company, or closing attorney.
  • Confirm how you will deliver funds: check or verified wire.

• After acceptance

  • Calendar the earnest money deadline and deliver funds on time.
  • Get a written receipt from the escrow holder.
  • Track inspection, appraisal, financing, and title deadlines.

• During contingencies

  • Schedule inspections and review reports promptly.
  • Keep lender updates and any denial letters in writing.
  • Send notices exactly as your contract requires and before deadlines.

• Before closing

  • Confirm your earnest money credit appears on the settlement statement.
  • Verify final wiring instructions for closing funds directly with the escrow holder.

Wire safety tips

• Always verify wiring instructions by calling the escrow holder using a trusted phone number.
• Do not rely on email alone. Wire fraud attempts often mimic legitimate messages.
• Confirm the account name matches the escrow or title company identified in your contract.
• Request a written confirmation or receipt as soon as the wire is sent.

Nashville scenarios to consider

• Multiple-offer situation: A larger deposit paired with a shorter but still workable inspection period can strengthen your position while maintaining protections. Consider whether a modest increase in earnest money plus clear appraisal and financing terms will help you stand out.
• Balanced market: A baseline deposit around 1 percent may be enough when inventory is steady and days on market are typical. Keep contingency timelines reasonable and deliver your deposit promptly to build trust.
• High-value property: Expect larger deposits or a higher percentage, aligned with market expectations for that segment. Precision on deadlines and documentation becomes even more important.

Work with a concierge advisor

A thoughtful earnest money strategy can help you win the home and protect your funds. You deserve guidance on deposit size, contingency structure, escrow logistics, and dispute resolution steps that fit Tennessee practice and Nashville market conditions. If you want a high-touch process that keeps you informed and confident from offer to closing, let’s connect.

Schedule a Concierge Consultation with Marsha Ivey Price to tailor your earnest money plan, strengthen your offer, and move forward with clarity.

FAQs

Is earnest money required in Tennessee?

• No law requires it, but most sellers expect a deposit; your purchase contract sets the amount and deadline.

How much earnest money is typical in Nashville?

• Common approaches include a few thousand dollars for lower-priced homes, about 1 percent as a baseline, and 2 to 5 percent in competitive situations.

Who holds earnest money in Tennessee deals?

• It is usually held by the listing broker, buyer’s broker, a title company, or a closing attorney in an escrow account.

When can I get my earnest money back?

• If you properly exercise a contract contingency, such as inspection, financing, appraisal, title, or a home-sale contingency, within the deadlines.

What happens if my loan is denied?

• With a financing contingency and the required lender documentation and notices, you can typically cancel and receive a refund.

How are escrow disputes resolved in Tennessee?

• Start with a mutual release; if no agreement, follow contract steps for mediation, arbitration, or court, and the escrow holder will keep funds until a proper order or agreement is received.