When your offer on a Greater Lafayette home gets accepted, one of the first things that happens is not exciting at all. You write a check, usually for a few thousand dollars, and hand it over to a title company or brokerage you may have never heard of. That check is your earnest money.
After nearly a decade of walking buyers through this moment, I can tell you the questions are almost always the same. Where does that money go? Can I lose it? How do I make sure it comes back to me? This guide answers those questions in plain English, with the Indiana details that matter.
What earnest money actually is
Earnest money is a deposit you put down shortly after a seller accepts your offer. It shows the seller you are serious about closing. They are pulling their home off the market for you, and your deposit says you will not waste those weeks.
If everything goes as planned, the money never really leaves your side of the ledger. At closing, your earnest money is credited toward what you owe, which means it reduces the cash you bring for your down payment and closing costs. It is not an extra fee. It is an early installment of money you were going to pay anyway.
Earnest money is also not the same thing as a down payment. The down payment is the chunk of the price your loan does not cover. Earnest money is a much smaller good-faith deposit made weeks earlier. The two meet at the closing table, where the deposit counts toward your total.
How much do buyers put down around here?
Indiana law does not set an amount, and neither does any rule I can point you to. In my experience around Lafayette, West Lafayette, and the surrounding towns, most buyers put down somewhere around one to two percent of the purchase price. On a modest home that might be a thousand dollars. On a competitive listing it can run higher.
The amount is a negotiating signal. A larger deposit tells a seller you are confident and committed, which can matter when several offers land at once. I cover this in more detail in my guide to writing a winning offer without overpaying.
I'll be straight with you: a big deposit only helps if the rest of your offer is solid. Sellers around here read the whole package, the financing, the dates, the contingencies, before they look twice at the deposit line.
Who holds the money, and why that matters
In Indiana, earnest money is held in escrow. In practice that usually means the listing brokerage's trust account or the title company that will handle your closing. Indiana license law requires brokers to keep client funds in a separate trust account, apart from the company's own operating money.
Two rules I give every buyer. First, never make the check out to the seller personally. Ever. Second, get a receipt showing where the deposit landed, and keep it with your contract paperwork.
The purchase agreement will name who holds the deposit. Read that line. If anything about it looks odd, ask your agent to explain it before you sign, not after.
The contingencies that protect your deposit
Your earnest money is protected by the contingencies written into your purchase agreement. A contingency is an exit ramp. If a specific problem shows up and you follow the contract's process, you can walk away and take your deposit with you. Three contingencies do most of the protective work in a typical Indiana deal:
- Inspection contingency. You have a set window to inspect the home and respond in writing. If the inspection turns up problems you and the seller cannot resolve, you can terminate under the contract's terms and keep your deposit. Here is what an Indiana home inspection covers.
- Financing contingency. If your loan falls through despite a good-faith effort on your part, this clause lets you exit with your money. It is one more reason a real pre-approval beats a pre-qualification. Fewer financing surprises means less risk to your deposit.
- Appraisal contingency. If the home appraises below the agreed price and the two sides cannot bridge the gap, you can walk away rather than overpay.
Waiving contingencies makes an offer look stronger, and in hot moments buyers get tempted. Every waived contingency is one less exit ramp for your deposit. Sometimes that tradeoff makes sense. It should always be a decision you make with clear eyes, not a box you check because everyone else seems to be doing it.
Deadlines are where deposits get lost
The quiet danger in a purchase agreement is not the fine print. It is the calendar. Inspection responses, loan application dates, appraisal windows: each one has a deadline, and missing a deadline can convert a protected deposit into an unprotected one.
This is the unglamorous part of my job. My team tracks every date on every contract, because a missed deadline is the most preventable way to put earnest money at risk. When people ask what a buyer's agent actually does between the offer and closing, this is a big piece of the answer.
How buyers actually lose earnest money
In nearly a decade I have seen very few buyers lose a deposit, and the pattern behind those rare cases is consistent:
- Walking away for a reason the contract does not cover. Cold feet is the classic example.
- Missing a contingency deadline, then trying to use that contingency anyway.
- Waiving protections to win a bidding war, then hitting the exact problem the protection existed for.
Notice what is missing from that list: honest deal failures. When a loan collapses or an inspection reveals a major issue and the buyer follows the contract, the deposit almost always comes home.
What happens when a deal falls apart
Here is the Indiana wrinkle most buyers do not expect. The escrow holder generally cannot release disputed earnest money on one party's say-so. Releasing the funds typically takes a mutual release signed by both buyer and seller.
Most of the time this is routine paperwork. When the two sides disagree about who deserves the money, the deposit can sit in the trust account while they work it out, and unresolved disputes can end up following the resolution process spelled out in the contract, sometimes all the way to small claims court. The best protection is a clean paper trail: written notices, delivered on time, through your agent.
One more warning: wire fraud is real
Buyers moving money are targets for wire fraud, and real estate closings are a favorite hunting ground for scammers. If you receive emailed wiring instructions, call the title company at a phone number you looked up yourself, not one printed in the email, and confirm the details by voice before sending anything. A legitimate title company will never pressure you to skip that verification step. A few careful minutes protect money you spent years saving.
Where local knowledge fits
You can find listings on any app. What an app cannot tell you is which homes are priced to appraise cleanly, which sellers are open to inspection negotiations, and which local title companies keep their timelines. That local knowledge, not access to listings, is what actually protects your money.
Our Buy & Move Smart program builds this into one path: honest numbers first, a clear list of must-haves, then a contract strategy that keeps your deposit protected from offer to keys. You can see how the whole buying side fits together in our home buying guides.
If you are getting ready to buy in Greater Lafayette and want a second set of eyes on the money side before you write an offer, pick a time that works for you and we will talk it through. No pressure either way. Let's get you home.