Buying or selling a home in Bozeman comes with a lot of moving parts, and one of the first you will hear about is earnest money. If you are wondering how much to offer, who holds it, and when you can get it back, you are not alone. Understanding this deposit helps you write a stronger offer, protect your interests, and avoid costly missteps. In this guide, you will learn how earnest money works in Montana, what is typical in Gallatin County, and how to handle it with confidence. Let’s dive in.
Earnest money basics
Earnest money is a good-faith deposit you pay after a seller accepts your offer. It shows you are serious and gives the seller some security while you work through contingencies like inspection, financing, appraisal, and title.
If you close, the deposit is credited toward your purchase price or closing costs. It is not an extra fee and it is not the same as your down payment. If the contract is terminated, the deposit becomes the disputed pot of funds, and who gets it depends on the contract and applicable law.
How Montana handles earnest money
Montana transactions typically place earnest money with a neutral third party. The purchase agreement should spell out who holds the funds, when they are due, where they are deposited, and how they can be released.
Who holds your deposit
In Bozeman and Gallatin County, title or escrow companies commonly hold earnest money in a trust or escrow account. In some cases, a brokerage may hold funds in a trust account if allowed by regulation. Your purchase agreement names the holder and governs release.
When you pay
Your contract will set a delivery deadline. Many agreements require delivery within 24 to 72 hours after mutual acceptance, though the exact timing is negotiable. In competitive situations, sellers often expect faster delivery.
Payment forms and verification
Common forms include a cashier’s check or a wire to the named escrow or title company. Larger deposits often require verifiable funds rather than a personal check. Because wire fraud is a known risk, always confirm wiring instructions by calling the escrow company at a number you find independently, then verify receipt with the escrow officer.
How much in Bozeman?
There is no single correct number for Gallatin County. Across the country, deposits are often a flat amount or about 1 to 3 percent of the purchase price. In hotter local markets, sellers may expect larger deposits and shorter contingencies. In cooler conditions, a smaller deposit with more protections may be acceptable. The right amount for you depends on price point, competition, and your risk tolerance.
A larger deposit can make your offer stand out, but it also increases your exposure if you default. Balance strength with protection by pairing a meaningful deposit with clear contingencies and disciplined timeline management.
Contingencies that protect your deposit
Most Montana purchase agreements include contingencies that, if used correctly, allow you to terminate and receive a refund of your earnest money. Common ones include:
- Inspection contingency, allowing you to cancel or negotiate if issues arise within the inspection period.
- Financing contingency, protecting you if your loan is not approved by the deadline.
- Appraisal contingency, addressing situations where the appraisal comes in lower than the contract price.
- Title contingency, allowing termination if title defects cannot be cured.
- Sale-of-home contingency, if you must sell your current home before buying.
These protections only work if you follow the contract instructions and deadlines.
When deposits are refunded or not
If you terminate properly under a contingency and meet timing and notice requirements, the earnest money is typically refunded to you. Contracts often require written notice and may ask for supporting documentation, such as a lender denial for a financing contingency.
If you miss a deadline, fail to deliver notice correctly, or back out for a reason not covered by a contingency, the seller may claim the deposit as a remedy. Results always depend on the written agreement.
Proper notice and deadlines
Your agreement will outline how to give notice, who must receive it, and by when. Put dates on your calendar and communicate in writing. Keep copies of delivery confirmations, deposit receipts, and all contract notices.
Disputes and escrow holds
If buyer and seller disagree about who should receive the earnest money, the escrow holder will typically keep the funds in the trust account until there is a mutual written release, a court order, or a resolution under the contract’s dispute procedures. Escrow agents do not usually release funds unilaterally.
Buyer default, seller remedies
Many purchase agreements include a liquidated damages clause that allows the seller to keep the earnest money if the buyer defaults. Courts look at whether the amount is a reasonable estimate of likely damages and not a penalty. If the contract does not include a liquidated damages clause, the seller may pursue actual damages or other remedies depending on the situation. Because enforceability depends on specific language and Montana law, consult a local real estate attorney if a dispute arises.
Seller breach and buyer options
If a seller wrongfully refuses to close, the buyer can generally seek the return of the earnest money and may pursue other remedies as allowed by the contract and law. Your escrow agent will follow the written instructions in the purchase agreement and any subsequent mutual releases or orders.
Practical tips for Bozeman buyers
- Choose an amount that strengthens your offer without exceeding your risk tolerance.
- Deliver funds on time, often within 24 to 72 hours, and confirm the escrow holder has received them.
- Protect your deposit with clear contingencies and strict attention to deadlines for inspection, financing, appraisal, and title.
- Guard against wire fraud by confirming instructions by phone and verifying receipt.
- Keep organized records: deposit receipts, written notices, and any lender or inspection documentation.
Practical tips for Bozeman sellers
- Have the deposit payable to a neutral title or escrow company. Avoid accepting funds payable to you personally.
- Confirm that funds clear, especially if a personal check is used.
- When comparing multiple offers, evaluate both the deposit size and the strength of the contingencies and timelines. A larger deposit can be persuasive but is one of several factors.
- If you expect to rely on a liquidated damages clause, make sure the language is clear and consistent with local practice. Consult your broker or attorney as needed.
Quick checklist
- Name the escrow or title company in the purchase agreement.
- Specify the deposit amount and delivery deadline.
- Choose the payment method and verify wiring instructions by phone.
- List all contingencies with firm dates for performance and notice.
- Clarify how disputes are resolved and whether liquidated damages apply.
- Keep copies of receipts, notices, and communications.
- Identify trusted professionals for guidance: local agent, title company, and attorney.
Local context in Gallatin County
Market conditions shape expectations. Bozeman and Gallatin County have seen periods of strong demand and limited inventory. In those conditions, sellers often favor larger deposits and shorter contingency windows. When the market cools, buyers may negotiate smaller deposits and more time for due diligence. Title and escrow companies, local real estate attorneys, and experienced Bozeman brokers play central roles in holding and disbursing earnest money and resolving disputes.
Move forward with confidence
Understanding how earnest money works helps you write a compelling offer and avoid unnecessary risk. If you want help setting the right deposit amount, structuring contingencies, or navigating timelines, tap a local advisor with deep Bozeman experience and construction insight. Schedule a free consultation with Unknown Company to talk through your goals and next steps.
FAQs
What is earnest money in Montana real estate?
- It is a good-faith deposit you pay after offer acceptance that shows commitment, is held by a neutral escrow holder, and is credited to you at closing.
How much earnest money should I offer in Bozeman?
- It depends on price, competition, and strategy. Many buyers use a meaningful sum or a small percentage. In hotter markets, larger deposits may strengthen your offer.
Who holds earnest money in Gallatin County?
- A neutral escrow or title company commonly holds it in a trust account, as named in the purchase agreement.
Can I get my earnest money back after inspection?
- Yes, if your inspection contingency allows termination, you act within the inspection period, and you give proper written notice per the contract.
What happens if a buyer backs out with no contingency?
- The seller may be entitled to keep the deposit under a liquidated damages clause or pursue other remedies, depending on the contract and circumstances.
How do I avoid wire fraud when sending earnest money?
- Call the escrow company at a verified phone number to confirm wiring instructions and then confirm receipt. Do not rely on email links alone.
When is earnest money applied at closing?
- If the transaction completes, your deposit is credited to your purchase price or closing costs on the final settlement statement.
