Thinking about making an offer on a home in Edison and wondering how earnest money works? You are not alone. First‑time buyers often ask how much to put down, who holds it, and when it is safe to get it back. In this guide, you will learn the basics for Middlesex County buyers so you can write a strong offer and protect your deposit. Let’s dive in.
What is earnest money
Earnest money is an upfront deposit that shows a seller you are serious about buying. It is applied to your funds at closing, such as your down payment or closing costs. The purchase contract controls the amount, who holds it, and when it is released. If a contract ends under a valid contingency, you typically get the deposit back; if you default, the seller may keep it according to the remedies in the contract.
How Edison EMDs work
You usually submit the deposit with your offer or within a short time after the contract is signed. The money is placed in a neutral trust or escrow account. At closing, your earnest money is credited to your total cash to close. Always make sure the contract clearly states the amount, the escrow holder, and release conditions, and ask for a written escrow receipt.
Typical Edison deposit amounts
- Baseline guidance in ordinary markets: 1% to 2% of the purchase price for many single‑family homes and condos in Edison.
- Competitive multiple‑offer situations: 2% to 5% or a higher fixed amount, such as $10,000, can help your offer stand out.
- Higher‑price or new construction: deposits may be staged, for example an initial EMD followed by additional deposits at set milestones.
- Customs shift with supply and demand, so check recent comps and ask your agent to confirm current norms with the listing agent.
When your deposit is due
Most contracts require the deposit with the offer or within a short window after the contract is ratified, commonly 1 to 3 business days. The contract should list acceptable forms of payment, such as check or wire. Before sending any funds, verify wiring instructions and payee details with your agent or attorney using a trusted phone number or in person.
Who holds your deposit
In New Jersey and Middlesex County, escrow can be held by different neutral parties. The contract should name the holder and where funds will be deposited.
- Brokerage trust account: fast to set up, but make sure you receive clear written receipts and release terms.
- Title or settlement company: commonly viewed as neutral, especially when issuing title insurance.
- Real estate attorney escrow: very common in New Jersey. Attorneys often manage trust accounts and handle deposit receipts.
Attorney review in New Jersey
New Jersey purchase contracts often include an attorney review period. After both parties sign, each side’s attorney typically has a short window, commonly three business days (confirm your contract), to review and cancel or negotiate changes. If the contract is rescinded during attorney review, the earnest money is usually returned per the contract.
Refundable situations: key contingencies
Contingencies protect your right to cancel and receive your deposit back if specific conditions are not met. Common protections include:
- Financing contingency if your loan cannot be secured within the agreed time.
- Inspection contingency so you can inspect, negotiate repairs or credits, or cancel within the inspection window.
- Appraisal contingency if the home appraises below the contract price and no agreement is reached.
- Sale‑of‑home contingency if you need to sell your current property first.
- Title or survey issues that cannot be cured.
- Attorney review cancellation during the attorney review period in New Jersey.
When you could forfeit
You are at higher risk of losing your earnest money if you default after contingencies expire. Missing deadlines, refusing to close without a contractual reason, or failing to remove contingencies on time can trigger the remedies in the contract, including loss of the deposit. If you waive contingencies, such as inspection or appraisal, and later try to cancel, the risk of forfeiture increases.
Avoid disputes and stay safe
- Track all deadlines in writing and follow cancellation steps exactly as the contract requires.
- Request a written escrow receipt that shows the account holder and deposit date.
- Verify wiring instructions by calling a trusted number or confirming in person to avoid wire fraud.
- Keep your agent and attorney in the loop before you send funds or sign releases.
Set the right amount
Choose a deposit that shows commitment without tying up more cash than you can afford. In a normal Edison market, 1% to 2% is a reasonable starting point unless the listing agent signals otherwise. In a hot, multiple‑offer situation, consider 2% to 5% if it fits your budget and risk tolerance. If you offer a larger deposit, keep strong contingency windows and clear escrow instructions, and consider staged deposits for bigger purchases.
Quick calculator examples
Use this simple formula to estimate your deposit: EMD = Purchase Price × EMD Percentage.
For $350,000:
- 1% = $3,500
- 2% = $7,000
- 3% = $10,500
- 5% = $17,500
For $600,000:
- 1% = $6,000
- 2% = $12,000
- 3% = $18,000
- 5% = $30,000
For $800,000:
- 1% = $8,000
- 2% = $16,000
- 3% = $24,000
- 5% = $40,000
Local customs can change quickly, so have your agent confirm what is typical for your price point and neighborhood.
Real‑world scenarios
- Standard market: You offer 1% on a $500,000 Edison home, keep inspection and financing contingencies, and your deposit is refundable if those contingencies are not satisfied.
- Competitive market: You offer 3% on a $600,000 home to stand out and keep contingencies but shorten the timelines. This is stronger, but you must watch deadlines closely.
- Very competitive: You offer 5% on a $700,000 home and waive inspection. It is a bold signal, but if you back out without a valid protection, you could lose the deposit.
Next steps
If you want to buy in Edison with confidence, set your deposit strategy before you write an offer. Review your budget, decide which contingencies you need, and confirm local norms for your target neighborhood. When you are ready, book a quick buyer strategy call to tailor your EMD to the property and the market. Schedule with Christian Torres for friendly, responsive guidance in English or Spanish.
FAQs
Is earnest money the same as a down payment in Edison?
- No. Earnest money is a good‑faith deposit credited at closing, while your down payment is the larger amount due at closing toward the purchase price.
Who usually holds earnest money in Middlesex County?
- The escrow holder can be a brokerage trust account, a title or settlement company, or a real estate attorney’s trust account. Your contract should name the holder and deposit location.
Can my deposit earn interest in New Jersey?
- It depends on the escrow holder and your contract terms. If the account earns interest, the contract should specify who receives it.
What if the seller will not release my deposit after I cancel under a contingency?
- Ask the escrow holder for a written accounting and request release. If the seller disputes, your attorney can demand release and, if needed, pursue mediation, arbitration, or litigation.
What if the appraisal comes in low on my Edison purchase?
- If your contract includes an appraisal contingency and no agreement is reached, you can cancel and typically receive the deposit back. If you waived the appraisal contingency, risk of forfeiture is higher.
