What earnest money is

Earnest money is a good-faith deposit you include with your offer to show the seller you're serious. In Wisconsin, it's part of the WB-11 Residential Offer to Purchase, the standard contract used in most home sales. It's not a fee; it's your money, applied toward your purchase at closing.

How much is typical

There's no fixed rule, but earnest money commonly runs around 1 to 2% of the purchase price. In the Madison and Dane County market, deposits in the range of roughly $1,000 to $5,000 (or about 1 to 3%) are common, depending on price point and how competitive the situation is. A stronger deposit can make an offer look more serious in a multiple-offer market.

Who holds it (not the seller)

This is the part that reassures buyers: the seller doesn't pocket your deposit. Under the WB-11, the parties choose who holds the earnest money, commonly the listing firm, the drafting firm, or a title company, held in a real estate trust account. If no one is selected, the default is the listing firm (or the drafting firm if the home isn't listed). The funds sit safely in trust until the deal closes or is resolved.

When it's due

The offer itself sets the deadline. In practice, earnest money is usually delivered within a couple of business days after your offer is accepted, to the holder named in the contract. Hitting that deadline matters, your agent will make sure it's handled on time.

How it's applied

Earnest money isn't an extra cost, it's a head start on what you already owe. At closing, it's credited on the closing statement toward your down payment and closing costs. So the deposit you put down up front simply reduces what you bring to the table at the end.

When you get it back

This is where Wisconsin's contingencies protect you. The WB-11 lets you include contingencies, common ones are financing, inspection, appraisal, title, and sometimes the sale of your current home. If a contingency isn't satisfied and you cancel within its deadline by following the contract's written-notice steps, your earnest money is generally returned to you. If an accepted offer is never reached, money held by a firm is promptly returned to whoever paid it.

The key is acting within the contingency windows and using the proper written notice, which, again, is exactly what your agent helps you track.

When you could lose it

The risk comes from walking away for a reason that isn't protected by a contingency, or after your contingency deadlines have passed. Backing out "just because" once you're past those windows can put your deposit at risk. That's why understanding your deadlines, and not waiving protections casually, matters so much.

What happens in a dispute

If a deal falls apart and buyer and seller disagree on who gets the earnest money, a firm holding it generally can't release it without a written disbursement agreement signed by all parties. Under Wisconsin's rules, if there's no agreement, the firm typically holds the funds for a period after the scheduled closing, and there are defined steps (including small claims court or an impartial attorney's opinion) to resolve it. It's uncommon, most deals close or cancel cleanly, but the process exists to protect both sides.

Frequently asked questions

About Reward Our Heroes™

Reward Our Heroes is Integrity Homes' program serving those who serve us, veterans, first responders, teachers, and healthcare workers. Through the Reward Our Heroes Foundation (a 501(c)(3) nonprofit), we're committed to honoring and giving back to community heroes across Dane County. Learn more at rewardourheroes.com.