Putting down money before you own the home can feel risky. You want your offer to stand out, but you also want your deposit protected if something goes wrong. The good news is that earnest money has clear rules in Knoxville that can work in your favor when you follow the contract. In this guide, you’ll learn how much to offer, when it’s refundable, and simple steps to keep your closing on track. Let’s dive in.
What earnest money is
Earnest money is a good-faith deposit you make to show you intend to buy. If you close, it is applied to your purchase price or closing costs. It strengthens your offer because it shows commitment.
The deposit is held in escrow. In Knoxville, it is typically held by a broker’s trust account, a title company, or a closing attorney. How the funds are held and released is guided by your purchase contract and the escrow holder’s policies.
Typical Knoxville amounts
Local practice in Knoxville and Knox County is generally modest compared with high-cost coastal markets. You will commonly see $500 to $5,000 on many offers. In competitive situations, buyers often use about 1 percent of the purchase price to stand out.
Your price point and the market’s speed matter. Entry-level homes often see smaller deposits. Higher-priced or multiple-offer homes can call for 1 to 3 percent or more. Cash and investor offers may also use larger deposits to signal certainty. Ask your agent what is customary for your neighborhood and price tier.
When you pay and who holds it
Most contracts require you to deliver the deposit shortly after mutual acceptance, often within 1 to 3 business days. The exact deadline will be written in your offer.
Funds are deposited with the escrow holder named in the contract. That may be the listing broker, the buyer’s broker, a title company, or a closing attorney. Many buyers prefer a neutral title company for clarity and convenience.
Refund rules and key contingencies
Your deposit is typically refundable when you follow the contract and exercise a contingency on time. Common protections include:
- Inspection contingency. You usually have 5 to 10 business days to inspect and either accept the home, negotiate repairs or credits, or terminate. If you cancel within the inspection period and give proper written notice, the deposit is typically refundable.
- Financing contingency. If you cannot obtain your loan within the agreed timeline and you notify the seller per the contract, you can usually recover your earnest money.
- Appraisal contingency. If the appraisal comes in low and you choose not to proceed under the contract’s terms, you may cancel on time and receive a refund.
- Title contingency. If title defects appear that cannot be cleared, you can terminate and recover the deposit.
- Home sale contingency. If your purchase depends on selling your current home and that contingency is not met, timely termination preserves refund rights.
When it is not refundable
- You terminate without a valid contingency that allows cancellation.
- You miss a deadline or fail to deliver written notice as required.
- You are in material breach, such as failing to close without an agreed extension.
If there is a dispute, many contracts require mediation or other resolution steps. Escrow holders often need a mutual written release or a court order to disburse funds when the parties do not agree.
Typical Knoxville timelines
- Inspection period. Many local contracts use 5 to 10 business days. Plan inspections immediately after acceptance so you can meet deadlines.
- Repair requests and responses. After inspections, buyers often submit a repair or credit request. Sellers commonly have a set number of days to respond, such as 3 to 5 days, depending on the contract.
- Appraisal and loan. Loan and appraisal timing is set in your contract, with many closings targeted within 21 to 30 days. Stay in close contact with your lender.
- Closing date and extensions. Your contract sets a closing date. If delays arise, you and the seller can agree in writing to extend. Missing a closing date without agreement can impact your deposit.
- Written notices. Most contracts require notices in writing. Email or other specified methods are usually acceptable if outlined in the contract. Always follow the exact instructions.
Steps to protect your deposit
Before you write an offer
- Get a full pre-approval from a reputable lender. This reduces financing risk and strengthens your offer.
- Ask your agent what deposit amount is typical for your price tier and area. In many Knoxville deals, 0.5 to 1 percent is a practical guideline, with higher amounts used when competition is strong.
- Choose an amount that shows commitment without adding unnecessary risk.
In your contract
- Include clear contingencies for inspection, financing, appraisal, and title.
- Set realistic timeframes based on inspector schedules and lender timelines.
- Specify where the deposit will be held and the exact deadline to deliver it.
- Follow the contract’s notice procedures and list who must receive notices.
During the contingency periods
- Schedule inspections right away and keep copies of all reports.
- Send any repair requests or termination notices before the deadline and in writing.
- Keep lender updates, appraisal notices, and communications in a dated folder.
If problems arise
- Low appraisal. Consider renegotiating, bringing additional funds, or terminating on time under the appraisal contingency.
- Financing issues. Obtain a written denial from your lender and deliver it per the contract to preserve your refund rights. You can also explore an extension if both parties agree.
- Disputes about the deposit. The escrow holder may require a mutual release or a court order. Mediation or legal counsel can help you resolve the issue per the contract.
Strengthen your offer without added risk
- Increase earnest money or shorten the deposit delivery window to show commitment.
- Consider a shorter inspection period, but allow enough time to do it right.
- Keep essential protections, especially for first-time buyers or relocators.
- In multiple-offer situations, consider small, targeted increases to the deposit instead of waiving key contingencies.
Common mistakes to avoid
- Missing notice or contingency deadlines.
- Writing vague contingency language or leaving timelines undefined.
- Waiving key protections without understanding the risk.
- Failing to specify a neutral escrow holder and clear deposit instructions in the contract.
The bottom line for Knoxville buyers
Earnest money should work for you. The right amount can strengthen your offer, and well-written contingencies protect your deposit when plans change. Lean on the contract, follow timelines, and keep every notice in writing.
If you want local guidance from offer to close, connect with Katina Ramsey. With 30-plus years in greater Knoxville, you get clear advice, steady communication, and a plan tailored to your goals.
FAQs
How much earnest money is typical in Knoxville?
- Many offers use $500 to $5,000, with about 1 percent of the price common in competitive situations.
Who holds the earnest money in Knox County?
- A broker’s escrow account, a title company, or a closing attorney typically holds the funds as directed by your contract.
When is earnest money refundable in Tennessee?
- If you terminate according to a contract contingency, such as inspection, financing, appraisal, or title, and you give timely written notice.
What happens if my appraisal comes in low?
- You can renegotiate, bring additional funds, or cancel on time under the appraisal contingency to recover your deposit.
What if my loan is denied after I am under contract?
- Provide the lender’s written denial and proper notice within the contract timeline to preserve your right to a refund.
Can the seller keep my earnest money if I change my mind?
- If you cancel without a valid contingency or you miss deadlines, the seller may have a claim to the deposit under the contract.
