Earnest Money in Colorado: How Much to Offer, Who Holds It and When You Get It Back

The short answer

Earnest money is a good-faith deposit a buyer puts down when a seller accepts their offer. In Colorado, the standard residential contract (the Colorado Real Estate Commission’s CBS1 form) names the amount, the form of payment and the Earnest Money Holder, who keeps it in a trust account for the buyer and seller alike. At closing it goes toward your purchase. If you terminate the contract on time under one of your rights, such as inspection, appraisal, title or loan approval, it comes back to you. If you miss a deadline or simply walk away without a right to terminate, the seller may be entitled to keep it.

What earnest money is, and what it isn’t

When a seller accepts your offer, they take the home off the market and turn away other buyers. Earnest money shows the seller you’re serious, and it gives them something if you back out without a valid reason. It isn’t an extra cost. Look at the price and terms table in §4.1 of the CBS1 contract and you’ll see earnest money listed alongside the new loan and cash at closing, all adding up to the purchase price. The contract lets the holder send it to the closing company at or before closing (§4.3), where it’s applied to your side of the settlement.

Earnest money is also different from your down payment and your closing costs, even though it ends up helping pay for them. You’ll still need the rest of your cash at closing in funds that are immediately verifiable and available. My guide to buyer closing costs in Colorado walks through what else to budget for.

How much earnest money should you offer?

There’s no amount written into the CBS1 contract. It’s a blank that you and the seller agree on, which is why you’ll hear different answers depending on the area, the price and how competitive the home is. Rather than chase a rule of thumb, I help buyers weigh a few practical questions:

• How competitive is the home? When several buyers want the same house, a stronger deposit can help your offer stand out next to the price, the financing and the dates.
• How much risk is the seller taking? A seller who has to buy their next home, or who has already moved, may look closely at how committed each buyer is.
• How confident are you in your deadlines? Earnest money is only at risk if you lose your rights to terminate, so a larger deposit makes more sense when your inspection, appraisal and loan dates are realistic and you’re watching them closely.
• What’s the rest of your cash plan? The deposit leaves your account early. Make sure it doesn’t leave you short for an appraisal gap, repairs or closing costs later.

For luxury homes, the deposit tends to be a bigger number simply because prices are higher, and sellers often read it as a signal of how prepared the buyer is. My guide to buying a luxury home in Denver covers how earnest money fits with proof of funds, financing and the rest of a strong offer. If you’re financing above the conforming limit, see jumbo loan limits in Colorado too.

Who holds the earnest money, and when it’s due

§4.3 of the contract has two blanks that matter here: the form of the deposit (a check or a wire, for example) and the name of the Earnest Money Holder. The holder is usually a brokerage or a title company, and the contract says the money is held in its trust account on behalf of the seller and buyer alike. It isn’t the seller’s money while the contract is pending.

Timing is just as important. Under §4.3, the buyer must tender the earnest money with the contract unless both sides agree to an Alternative Earnest Money Deadline (§4.3.1). That deadline is one of the dates in the contract’s deadline table, and §20 makes time of the essence for every date, including payments. If your earnest money isn’t paid or honored when it’s due, that can put you in default. My guide to Colorado real estate contract deadlines explains how every date in the contract is counted.

When you get your earnest money back

The CBS1 contract gives buyers several rights to terminate, each tied to its own deadline. If you have a right to terminate and you use it on time, §4.3.2 says you’re entitled to the return of your earnest money, and §24.2 says that when the contract terminates, the earnest money must be timely returned to the buyer. The most common reasons buyers terminate include:

• Inspection. You can object to or terminate over the property’s condition by the Inspection Objection Deadline. My luxury home inspection checklist covers what to look at.
• Appraisal. If the appraised value comes in below the price, you can terminate or object by the Appraisal Objection Deadline. See what happens if the appraisal comes in low.
• Loan approval. If your loan isn’t available on terms you’re satisfied with, you can terminate by the loan deadlines in §5.
• Title, documents and disclosures. There are deadlines to object to title, HOA documents, the survey and other due diligence items. The seller’s property disclosure and any metro district information are worth reading closely before those dates pass.

Two details trip people up. First, §24.1 says a termination is effective when the other side receives your written notice on or before the deadline, and a notice delivered after the deadline doesn’t terminate the contract. Second, if you miss a deadline, you’re treated as having accepted that item. That’s why I track every date for my buyers and get notices out well before the cutoff.

If the seller is the one in default, §20.2.1 lets the buyer treat the contract as canceled, get all earnest money back and pursue damages, or keep the contract in force and ask for specific performance.

When a buyer can lose earnest money

Losing earnest money usually comes down to one of two things: walking away without a right to terminate, or letting a deadline pass. The contract is direct about this. In the loan section, §5.2.2 says that if the seller isn’t in default and doesn’t receive the buyer’s notice to terminate on time, the earnest money will be nonrefundable, except where the contract provides otherwise.

What the seller can do next depends on a box in §20.1. Unless the parties check the box for §20.1.1, §20.1.2 (liquidated damages) applies. Under liquidated damages, the seller may cancel the contract and keep the earnest money as their only remedy for the buyer’s failure to perform, with a few narrow exceptions written into the contract. If §20.1.1 is checked instead, the seller may cancel and keep the earnest money and seek additional damages, or keep the contract in force and ask a court for specific performance. That choice deserves a careful look before you sign, and it’s a good question for your attorney.

How the earnest money release works

Earnest money doesn’t move just because one side asks for it. Under §23, the holder releases it after receiving written mutual instructions signed by the buyer and the seller, usually on an Earnest Money Release form. The contract puts firm timelines on both sides:

• Seller’s signature. After a proper termination, if the earnest money hasn’t already been returned, the seller agrees to sign and deliver the release within three days of receiving it (§4.3.2). A seller who doesn’t is in default (§4.3.2.1), unless the seller is entitled to the money because the buyer defaulted.
• Buyer’s signature. The same goes the other way. If the seller is entitled to the earnest money, a buyer who fails to sign and return the release in time is in default (§4.3.2.2), unless the seller defaulted.
• The holder’s timing. When a brokerage firm is the holder, the broker acknowledgment at the end of the contract says it will release the earnest money within five days of receiving the signed instructions, as long as the earnest money check has cleared.

Day counts in the contract follow §3.3.2: the first day is excluded and the last day is included. Whether a deadline that lands on a weekend or holiday rolls forward depends on a box in §3.3.3, so check how your contract is marked.

What happens in an earnest money dispute

Sometimes the buyer and seller disagree about who gets the deposit. When that happens, §23 says the holder isn’t required to release it. The holder can wait for the buyer and seller to resolve it, deposit the money with a court and ask the court to decide (called interpleader), or notify both sides that it will return the earnest money to the buyer unless it receives a copy of a lawsuit between them within one hundred twenty days.

Before anyone goes to court, §22 requires the buyer and seller to try mediation in good faith. The mediator can’t impose a decision, the parties share the cost equally and the obligation to mediate ends if the dispute isn’t resolved within thirty days of the written request, unless they agree otherwise. Under §21, if the dispute does go to arbitration or court, the prevailing party is awarded reasonable costs and attorney fees. That’s a strong reason for both sides to read the contract closely and settle reasonable disputes early.

How to protect your earnest money

• Verify wiring instructions by phone. Wire fraud targets real estate deposits. Before you send money, call the title company or brokerage at a number you find yourself, not one from an email, and confirm the instructions. Treat any email that changes wiring details as a red flag.
• Get a receipt. Ask for written confirmation that the holder received your deposit, and keep it with your copy of the contract.
• Set realistic deadlines. Ask your lender how long underwriting and the appraisal usually take before you fill in the dates, and give yourself enough time to schedule inspections and read the HOA documents.
• Put every notice in writing. Objections and terminations need to be written and received on time. A phone call doesn’t count.
• Plan the sale of your current home. If you’re selling to buy, coordinate both contracts so a delay on one side doesn’t put your deposit at risk. My guide to buying and selling at the same time in Colorado walks through the options.

Sellers, the same rules protect you. A deposit held in a neutral trust account and clear deadlines tell you when a buyer is truly committed. If you’re weighing offers, my guide to selling a luxury home in Denver covers how I compare the terms behind the price.

How I help buyers with earnest money

I grew up in Castle Rock, and I help luxury buyers and sellers across Denver, Lakewood, Castle Pines, Highlands Ranch, Parker, Castle Rock, Broomfield and Colorado Springs. I work with Sean Gribbons at The Gold Standard Brokerage; Sean founded the brokerage, and we run it together. When you’re ready to make an offer, I’ll help you pick an earnest money amount that fits the home and your cash plan, set deadlines you can actually meet, confirm where your deposit is held and track every date until closing. If something goes wrong, I’ll make sure your notices go out on time and in writing.

Buying? Start with my guides to buying a home in Denver, Highlands Ranch, Parker, Castle Rock, Castle Pines and Lakewood, or explore Broomfield and Colorado Springs. Selling first? See my page for selling a house in Denver. You can also call or text me at 720-357-5785 or use the inquiry form on this page.

This guide is general information, not legal or lending advice. Section references are to the Colorado Real Estate Commission’s CBS1 residential contract (mandatory use date January 1, 2026). Your contract’s terms, including any Additional Provisions, control your transaction.