Earnest Money in California: A San Mateo Buyer’s Guide

How much should you put down as earnest money when you buy a home in San Mateo? It is a common question, and a smart one. Your deposit signals commitment, affects how competitive your offer looks, and needs careful handling to keep it safe.

In this guide, you will learn what earnest money is, how it works under California contracts and escrow, typical deposit amounts in San Mateo, when it is due, how to protect it from wire fraud, and when you can get it back. You will also get a simple checklist you can follow from offer to closing. Let’s dive in.

Earnest money, explained

Earnest money is a good‑faith deposit you make when your offer is accepted. It shows the seller you are serious about purchasing the property. The deposit is typically held by the escrow company and is credited to you at closing.

Think of it as an early part of your funds. It is not your entire down payment. At closing, your deposit is applied toward the purchase price and closing costs, and you bring in the remainder needed to close.

In competitive markets, a strong deposit can help your offer stand out. It can also give the seller some protection if a buyer defaults without a valid reason under the contract.

How California escrow handles deposits

In California, your purchase contract controls how your earnest money is handled. Most buyers and sellers use the California Association of Realtors Residential Purchase Agreement, along with addenda that may address details like contingencies and liquidated damages.

Your deposit is placed with a neutral escrow holder in a trust or escrow account. Escrow companies are licensed and regulated by the state. The escrow holder follows the written instructions from the parties, which usually means the signed purchase agreement and any later amendments.

Escrow does not decide who is right in a dispute. Funds are released only when both buyer and seller provide written instructions, or when there is a court order or arbitration award. If a buyer breaches the contract, the seller’s remedies depend on the contract language and which contingencies were removed. In some cases, a seller may keep the deposit as liquidated damages, pursue specific performance, or seek other damages as allowed by the agreement.

Typical earnest money in San Mateo

San Mateo is part of a high‑value Bay Area market. Local practice often falls within a few common ranges:

• Standard offers: about 1 percent of the purchase price.
• Stronger offers: about 2 to 3 percent of the purchase price.
• Very competitive situations: higher percentages or a larger fixed sum.

Here are simple illustrations:

• On a $1,000,000 purchase, 1 percent is $10,000, 2 percent is $20,000, and 3 percent is $30,000.
• On a $2,000,000 purchase, 1 percent is $20,000 and 2 percent is $40,000.

What should you choose? It depends on price point, the number of competing offers, whether the contract includes a liquidated damages clause, and your financing and contingency plan. All‑cash buyers sometimes use a larger deposit to strengthen their position, while financed buyers may balance deposit size with contingency timelines.

When your deposit is due and how to pay

Your contract sets the deadline for the earnest money. In many cases, the deposit is due within 1 to 3 business days after offer acceptance. Read your agreement closely and mark the exact due date.

You can usually deliver the deposit by wire transfer, personal or cashier’s check payable to the escrow holder, or by an electronic transfer if the escrow company supports it. Larger deposits are commonly wired.

If you are using a mortgage, your lender will ask for documentation of the source of your deposit funds. Expect to provide recent bank statements and, if applicable, gift letters. Keep all receipts and confirmations from escrow.

Avoiding wire fraud

Real estate wire fraud is a real risk. Criminals sometimes send fake wiring instructions that look legitimate. Protect yourself with a few simple steps:

• Before sending money, call the escrow officer at a verified phone number from the escrow company’s official website or your signed documents. Do not rely on a phone number in an email thread.
• Confirm the routing and account numbers verbally. Ask the escrow officer to read them back to you.
• Use two‑factor verification for any changes. If you receive updated wiring instructions by email, assume they are suspicious until you confirm by phone using a known number.
• Limit sending sensitive documents by unsecured email. Ask if your escrow offers a secure payment portal or encrypted delivery.
• If you suspect fraud, contact your bank, your escrow officer, and your agent at once, and act fast.

When you can get your deposit back

Whether you receive your deposit back depends on your contingencies and timing. Contingencies protect you only while they are active and within the agreed periods. Common buyer protections include:

• Inspection contingency. You can typically cancel within the inspection period and receive your deposit back, as long as you follow the notice rules in the contract.
• Loan contingency. If you cannot obtain financing within the loan contingency period and you give proper notice, your deposit is usually refundable.
• Appraisal contingency. If the appraisal comes in low and you cancel based on the contract terms, you can often receive your deposit back.
• Title or HOA review. Significant issues discovered within the review period can provide a basis to cancel with a refund.

Here are common scenarios:

• You cancel during the inspection period and give notice in the manner required by the contract. Your deposit is refunded.
• You remove your loan contingency and later cannot secure financing. You likely risk losing your deposit unless the seller breaches or the contract says otherwise.
• The seller cannot deliver clear title as required. You are typically entitled to a return of your deposit.

The key is to track deadlines and follow the written procedures in your contract. Missing a notice deadline can put your deposit at risk.

If a deal falls apart or a dispute arises

Escrow’s role is neutral. If the buyer and seller disagree about who should receive the deposit, escrow will hold the funds until both sides sign a written release or a court or arbitration order directs disbursement.

Your options include negotiating a mutual release, using mediation or arbitration if your contract calls for it, or filing a legal claim. Because litigation is slow and expensive, many parties try to reach a negotiated resolution quickly.

A simple San Mateo buyer checklist

Use this timeline to keep your deposit safe and your purchase on track.

Before you submit an offer:

• Ask your agent about current San Mateo norms for deposit size at your price point.
• Confirm any seller preferences for deposit amount or a shorter deposit deadline.
• Prepare recent bank statements or proof of funds. Have a cashier’s check ready if you plan to deliver in person.

After acceptance:

• Calendar the deposit deadline and send funds on time. Keep the wire or check receipt.
• Verify the escrow company’s name and phone from a trusted source. Confirm wiring instructions by phone before you send anything.
• Save copies of all confirmations and escrow receipts.

Managing contingencies:

• Track inspection, loan, appraisal, and any title or HOA review periods. Use reminders.
• If you plan to cancel, follow the exact notice method required by the contract and keep a copy.
• Coordinate with your lender to provide documentation for your deposit and other funds.

If issues arise:

• Contact your agent and escrow officer right away. Do not send additional funds until instructions are verified.
• If you suspect wire fraud, also notify your bank immediately.

At closing:

• Review the final settlement statement. Your deposit should be credited toward your purchase price and closing costs.

Local strategy tips

• Calibrate strength with safety. A larger deposit can help your offer stand out in San Mateo, but it should align with your contingency plan and risk tolerance.
• Mind the calendar. Short, clean timelines look strong to sellers. Only shorten contingency periods if you can realistically complete inspections, appraisal, and loan steps on time.
• Keep documentation tight. Your lender will source your deposit funds, so keep statements organized and ready.
• Communicate early. If something feels off, loop in your agent and escrow officer quickly. Most problems are easier to solve when addressed early.

Partner with a local advisor

The right guidance can help you set the right deposit, protect it, and move confidently from acceptance to closing. If you are weighing how much earnest money to offer, or you need a plan that balances competitiveness with protection, let’s talk about your goals and the current San Mateo market.

Ready to take the next step on the Coastside or Peninsula? Get a free Coastside home valuation or schedule a consultation with Unknown Company.

FAQs

What is earnest money for a San Mateo home purchase?

• It is a good‑faith deposit you submit after offer acceptance, held by escrow and credited to you at closing under your California purchase contract.

How much earnest money is typical in San Mateo?

• Many buyers offer around 1 percent of the price, stronger offers are often 2 to 3 percent, and some competitive situations use higher amounts or fixed sums.

When is my California earnest money due after acceptance?

• Your contract sets the deadline, which is often within 1 to 3 business days, so mark the due date and send funds on time.

Who holds the deposit during escrow in California?

• A licensed escrow holder keeps the funds in a trust or escrow account and releases them only with mutual written instructions or a court or arbitration order.

Can I get my earnest money back if the appraisal is low?

• If your contract includes an appraisal contingency and you cancel properly within that period, you can usually receive a refund.

What if I cannot get my loan after removing the loan contingency?

• You likely risk losing the deposit unless the seller breaches or your contract provides another protection, which is why timing matters.

How do I protect my deposit from wire fraud?

• Always verify wiring instructions by calling your escrow officer at a confirmed phone number, use two‑factor verification for any changes, and avoid sending sensitive data by unsecured email.

Does my lender need to see where the deposit came from?

• Yes. If you are financing, your lender will source and document the deposit funds with bank statements and, if applicable, gift letters.