Earnest Money in Tennessee: What Buyers Should Know

Buying in Nashville can move fast, and earnest money is one of the first decisions you make after your offer is accepted. It can help you win the home you love, but it also carries risk if you miss deadlines or waive protections. You deserve a clear, practical guide before you send a wire or write a check.

In this post, you will learn how earnest money works in Tennessee, what is common in Davidson County and nearby luxury submarkets, when deposits are refundable, and how to use your deposit to strengthen your offer without taking on unnecessary risk. Let’s dive in.

Earnest money basics in Tennessee

Earnest money is a good‑faith deposit you submit with your offer to show the seller you are serious. If you close, it is credited toward your cash to close, which can include your down payment and closing costs. It is not an extra fee.

In Tennessee, the purchase contract specifies how the deposit is handled. The agreement names who will hold the funds, when you must deliver them, and what happens if either party terminates under the contract.

Your contract will also state that the deposit is applied at closing. Keep every receipt and confirmation so your credits are documented.

Who holds your deposit

In Tennessee, earnest money is typically held in an escrow or trust account. The holder is named in the contract and is usually one of the following:

• A title company or closing agent
• An attorney who is managing the closing
• The listing brokerage, depending on brokerage policy

The contract should include instructions for delivery and timing. It is common to see delivery due within 24 to 72 hours after the contract is fully signed, but your exact deadline is what the contract states. Always obtain a written receipt confirming the funds were received and placed in escrow.

Nashville deposit ranges

There is no single correct number for every Nashville purchase. In many markets, buyers often see deposits around 1 to 3 percent of the purchase price in balanced conditions. Lower flat amounts may appear in softer segments, while hotter segments see larger deposits.

In Nashville, practice varies by price point and competitiveness. Entry and mid‑range homes may use flat amounts or percentage‑based deposits. In highly desirable neighborhoods or multiple‑offer situations, buyers often increase deposit size to signal commitment.

In luxury segments around areas such as Belle Meade, Forest Hills, Green Hills, Brentwood, and Franklin, deposits tend to be higher in absolute dollars, even if the percentage is similar. It is not unusual to see deposits in the tens of thousands on higher‑priced homes. Seller expectations can shift with market tempo, so lean on current local data when deciding what is appropriate.

Refundable vs. forfeited scenarios

Whether your deposit is refundable depends on your signed contract and your deadlines. Common buyer‑protective contingencies include:

• Inspection contingency: You can withdraw within the inspection period or if parties cannot agree on repairs or credits, depending on the wording.
• Financing contingency: If you cannot obtain the specified loan by the deadline and follow the contract’s requirements, you can usually cancel and receive the deposit back.
• Appraisal contingency: If the property appraises below contract price and the parties do not reach a new agreement, you may be able to terminate and recover the deposit under the terms.
• Title or survey issues: Unresolved title defects or survey disputes can permit termination and refund.

You risk forfeiture if you default without a valid contingency or after cure periods expire. Many Tennessee contracts provide for liquidated damages that allow the seller to claim the deposit, or the seller may pursue other remedies. Escrow agents often hold funds until both parties sign a mutual release or there is a court order or instruction consistent with the contract.

How deposits strengthen offers

A larger earnest money deposit signals seriousness and capacity. Sellers notice a buyer who moves funds quickly and follows instructions. In a close competition, a well‑sized deposit can feel as convincing as a small bump in price.

There are tradeoffs. A bigger deposit increases your exposure if you default or waive protections. Waiving contingencies may strengthen an offer more than increasing the deposit, but it raises the risk of forfeiture. The goal is to find a balance that protects you while meeting the seller’s need for certainty.

In the luxury tier, sellers weigh the whole package. Proof of funds or a strong pre‑approval, a realistic closing timeline, and clean contingency language can matter as much as the deposit itself. A moderate deposit with excellent documentation and tight timelines can beat a larger deposit from an unprepared buyer.

Contract terms to confirm

Protect your deposit by making sure these items are clear in your contract:

• Escrow holder: Name the title company, attorney, or brokerage, and the trust account.
• Delivery deadline: Exact timing for the deposit after full execution of the contract.
• Contingency deadlines: Inspection, financing, and appraisal dates, plus what happens if you miss them.
• Release language: How funds are disbursed if either party terminates validly.
• Non‑refundable components: If any portion becomes non‑refundable, specify the triggers in writing.
• Closing credit: State that your earnest money will be applied to your closing funds.

Process steps and best practices

Follow a clear process from offer to escrow to reduce risk and signal professionalism:

1. Confirm wiring instructions directly with the escrow holder by phone using a trusted number. Wire fraud is a real risk. Never rely solely on email for first‑time instructions.

2. Deliver funds on time. Aim to send or deliver the same day your deadline starts. Notify your agent and the escrow holder once sent.

3. Get a dated receipt. Keep confirmations that show funds were received and deposited to the escrow account.

4. Track your deadlines. Put inspection, financing, appraisal, and any cure periods on your calendar and in your client portal if available.

5. Document everything. Keep all notices and responses in writing and submit on or before deadlines.

6. Ask about safeguards. You can ask the escrow holder about how funds are held and segregated, and what their policies are if a dispute arises.

Luxury market considerations

If you are buying at the higher end, consider a deposit strategy that aligns with the expectations in your micro‑market:

• Use a deposit size that feels proportional to the price and the level of competition.
• Pair the deposit with strong proof of funds or a detailed pre‑approval from a reputable lender.
• Offer a realistic, streamlined timeline for inspections and closing that matches the property’s complexity.
• Consider two‑stage structures only with clear contract protections. Some buyers increase or release a portion after contingencies are removed, but this should be done carefully and only if it fits your risk tolerance.

Common mistakes to avoid

• Sending a deposit late. Late delivery can weaken your position or even breach the contract.
• Waiving key contingencies without a plan. Understand the risk before adjusting inspection, appraisal, or financing terms.
• Assuming the deposit is always refundable. Refundability is contract‑driven and deadline‑driven.
• Relying on email for wire details. Always verify wiring instructions through a secure, direct channel.
• Terminating without checking the contract. Use the required notice forms and language to avoid disputes over funds.

Your next step

Earnest money is a small part of your total funds, but it carries big weight in how your offer is received and how protected you are. With the right structure, you can show commitment while keeping sensible protections in place.

If you want a clear, confident path from offer to closing in Nashville’s core neighborhoods and surrounding luxury markets, let’s talk about a deposit strategy that fits your goals. Reach out to Custer Rowland to get started.

FAQs

What is earnest money in Tennessee real estate?

• It is a good‑faith deposit you submit with your offer that is held in escrow and credited to your closing funds if the transaction closes.

How much earnest money is typical in Nashville?

• Ranges vary by price point and competition; many buyers use flat amounts or about 1 to 3 percent in balanced conditions, with higher absolute dollars in luxury segments.

Is my earnest money refundable if my loan is denied?

• If you have a financing contingency and meet the contract’s requirements and timelines, it is generally refundable; without that protection, you risk forfeiture.

Who should hold the deposit in Nashville transactions?

• Title companies commonly hold funds, though attorneys or listing brokerages may hold them; your contract names the escrow holder and the delivery method.

What happens to the earnest money at closing?

• It is credited toward your cash to close, which can include your down payment and closing costs, as stated in the contract.

Can I structure a two‑part deposit?

• Some buyers do, with a second portion or release after contingencies are removed; this should be done only with clear contract language and comfort with the added risk.