Earnest money in Michigan is a good-faith deposit the buyer usually pays when the purchase agreement is signed. It is held by a third party, such as a broker or title company, and credited to the buyer at closing. No Michigan law sets the amount, and the purchase agreement decides when you get the money back or lose it. This guide covers how much to offer, who holds the money, how it is recorded, when it is refundable and what happens if you and the seller disagree.
TL;DR
- The buyer usually pays the deposit when the purchase agreement is signed, and the agreement should state the amount, who holds it and how it is applied, returned or forfeited (State Bar of Michigan).
- No law regulates the amount, and an agreement without a deposit is enforceable, although that is rare (Michigan Realtors).
- A broker holding the deposit must put it in a trust or escrow account within 2 banking days after notice that all parties accepted the offer (MCL 339.2512).
- Your refund rights come from the contingencies and default terms in your contract, so read them before you sign.
- In a dispute, a broker cannot simply pick a side: the money stays in trust until you both agree in writing or a court decides.
Table of Contents
- What earnest money is and who pays it
- Is earnest money required in Michigan?
- How much earnest money to offer in Michigan
- Who holds the deposit and how it is recorded
- Does Michigan require a cashier’s check?
- When you get earnest money back
- What happens if you and the seller disagree
- Protecting your deposit: practical steps
- Our perspective
- Buying or selling in Metro Detroit?
- FAQ
- Sources
What earnest money is and who pays it
Earnest money is a deposit that tells the seller you are serious. After the seller accepts your offer, the home comes off the market (in practice) while you complete inspections, the appraisal and financing. The deposit is your stake in that process.
The buyer usually pays it when the purchase agreement is signed. The State Bar of Michigan’s Real Property Law Section says the agreement should spell out three things: the amount, where the money will be held (for example with a real estate broker or a title company), and how it will be applied, returned or forfeited (brochure). If any of those three is vague in your draft, ask your agent or attorney to fix it before you sign.
The deposit is not a fee. It is not the seller’s money unless you default, and it is not extra cost. At closing it is credited to you as part of your purchase funds, which the standard Greater Metropolitan Association of REALTORS sales contract describes as being credited to the buyer at closing (GMAR Sales Contract).
Is earnest money required in Michigan?
No. The Michigan Realtors’ Legal Hotline Companion says a deposit is not required for a valid, binding contract, because the parties’ mutual promises are enough consideration (Legal Hotline Companion). The association’s guide to deposits also notes that a purchase agreement with no deposit is enforceable, though rare (Michigan Realtors).
In practice, almost every offer includes one, and a seller will usually read an offer with no deposit as a weak one. A deposit signals commitment, and sellers choose between offers.
How much earnest money to offer in Michigan
The same Michigan Realtors guide says no law regulates the amount. That means the number is a negotiation, shaped by price, competition and your risk tolerance.
The common rule of thumb in Southeast Michigan is a percentage of the price, often in the 1% to 3% range, or a flat dollar figure in markets with lower-priced homes. Here is how that looks on common prices:
| Purchase price | 1% | 2% | 3% |
|---|---|---|---|
| $120,000 | $1,200 | $2,400 | $3,600 |
| $250,000 | $2,500 | $5,000 | $7,500 |
| $400,000 | $4,000 | $8,000 | $12,000 |
These are arithmetic examples, not required amounts. Several things push you toward the higher or lower end:
- Competition. In a multiple-offer situation, a larger deposit can make an offer look stronger. It also puts more of your money at risk, so pair it with contingencies you are comfortable with.
- Price tier. On lower-priced homes, a flat amount such as a few thousand dollars often does the job. On higher-priced homes, a percentage scales better.
- Your contingencies. A deposit protected by inspection, appraisal and financing contingencies carries less risk than one in an offer that waives them.
- Your cash. The deposit comes out of the same pocket as your down payment and closing costs. Budget for all three.
For a Detroit-focused breakdown of amounts and the banking-day rule, see our guide to protecting earnest money in Detroit. If cash is tight, our piece on down payment money Michigan buyers miss covers programs worth checking before you commit funds.
Who holds the deposit and how it is recorded
The buyer and seller can agree that any third party holds the deposit. Most often it is the buyer’s broker, the seller’s broker or a title company. Michigan Realtors confirms the parties can choose any third party (Michigan Realtors).
The two-banking-day rule
When a real estate broker holds the money, state law controls the timing. Under MCL 339.2512, a broker must deposit money belonging to others that is made payable to the broker into a separate custodial trust or escrow account no later than 2 banking days after the broker receives notice that all parties accepted the offer. The broker must also account for the full amount when the transaction closes or terminates (MCL 339.2512).
The GMAR sales contract uses the same timing. The deposit goes into the escrow account of the buyer’s broker, the seller’s broker or the title company within two banking days of notice of acceptance, and stays there until closing (GMAR Sales Contract).
What the paper trail looks like
Michigan Realtors explains the handling rules for licensees:
- A salesperson cannot sit on the deposit check until there is a binding contract. The check goes to the salesperson’s broker on receipt.
- The broker keeps a chronological record of receipts and distributions, plus a transaction-specific record.
- A broker may not mix its own funds into the trust account, except up to $2,000 to avoid service charges.
For you as the buyer, the practical step is simple: get a written or emailed receipt showing the amount, the date and the holder’s name, and confirm the holder’s account details directly with the brokerage or title company by phone before sending money.
Does Michigan require a cashier’s check?
We found no Michigan statute that requires a cashier’s check. The form of payment comes from your purchase agreement. The GMAR purchase agreement says the buyer deposits with the broker by check, money order, cashier’s check or certified funds (GMAR purchase agreement). Other forms and other holders can set their own terms, and some title companies accept wires.
Before you pay, ask the holder which methods it accepts and how fast the funds clear. A deposit that bounces or arrives late can put you in breach of your own contract.
When you get earnest money back
Your refund depends on what the contract says, not on a general rule. Three parts of the agreement matter most.
Contingencies
Contingencies are conditions that let you leave the deal and recover your deposit. Michigan purchase agreements commonly include financing, inspection, appraisal and title contingencies. If one is not met within the agreed time, you can usually walk away and get the deposit back (LegalClarity). The key word is time: each contingency has a deadline, and missing it can end your protection. Our guide to home offer contingencies walks through how to set them for a Metro Detroit offer.
Default terms
Michigan courts enforce what the parties wrote. A few examples:
- In an April 2026 decision, Howard v Winston, the Court of Appeals applied a clause saying that if the buyer refuses to perform, the deposit is forfeited and the seller may apply it to damages as liquidated damages, and that if the seller defaults, the deposit goes back to the buyer (opinion).
- In McKind v Palms Investments (2007), the court upheld a term making the deposit non-refundable and forfeited as liquidated damages if the purchaser failed to close by the closing date, finding the language unambiguous (opinion).
- In Livonia Gateway Investments v Brook Property Holding (2019), the contract was silent on what happens to the deposit after a breach. The court held that the parties’ intent, as shown in the agreement’s terms, controls, and that the ambiguity was a question for the fact-finder (opinion).
The lesson from all three: clear language is what protects you. Silence invites a lawsuit.
Closing
If the sale closes, the deposit is credited toward your purchase costs. You do not get a separate check back.
A quick checklist before you sign
- Is the deposit amount written clearly?
- Does the contract name who holds it?
- Does it say what happens if the seller defaults and what happens if you do?
- Are your contingency deadlines in calendar dates you can meet?
- Do you know how the deposit will be paid and by when?
An attorney can review a purchase agreement, and it is worth doing if the deposit is large or the terms are unusual.
What happens if you and the seller disagree
Say you terminate over an inspection issue, and the seller claims you missed the deadline. Who gets the money?
Not the broker’s call. If the funds are in a licensee’s trust account and there is a dispute, they must stay there until the buyer and seller agree in writing or a court order directs disbursement. The licensee can also interplead the funds with the court (Michigan Realtors). The GMAR purchase agreement says the same: the deposit is disbursed only under the agreement’s terms, a fully executed mutual release, or after a civil action decides who is paid (GMAR purchase agreement).
Under Michigan administrative rule R 339.22313(6), a deposit that both sides claim stays in the broker’s trust account until a civil action decides it or both parties agree in writing. The broker may also file to interplead the deposit (GMAR guide to interpleading). Interpleader means the broker files a summons and complaint, usually in district court if the deposit is under $25,000, and asks the court to accept the money and release the broker from further liability.
Why the rule exists: Michigan Realtors says it was amended after judicial decisions held brokers liable for attorney fees when they refused to release funds without a court order (2013 guide).
What that means for you: a standoff can freeze your money for weeks or months. The fastest fix is usually a signed mutual release, so if the dispute is small, consider whether compromise beats waiting. For larger amounts, talk to a real estate attorney.
Protecting your deposit: practical steps
- Calendar every deadline. Inspection, appraisal and financing dates are where deposits are won or lost.
- Put terminations in writing. Follow the notice method the contract specifies.
- Work with an agent who handles trust-account paperwork cleanly. You can compare local options in our Metro Detroit real estate agent rankings.
- Line up financing early. A pre-approval from a lender reduces the chance your financing contingency becomes the reason you lose money. See our Metro Detroit mortgage lender rankings.
- Know your other closing costs. Title insurance and transfer tax come at the same table. Read our guides on title insurance in Michigan and Michigan transfer tax.
Our perspective
Most earnest money problems we see described by Metro Detroit buyers are not about the amount. They are about timing and wording: a missed contingency date, a vague forfeiture clause, a deposit sent to the wrong place.
That is why we treat the deposit as a contract question first and a dollar question second. Our rankings of agents and lenders are editorial, with no paid placement, and they are built on research and customer sentiment so you can pick people who explain the paperwork before you sign it.
If you are buying in Wayne, Oakland or Macomb county, ask whoever holds your deposit to confirm in writing when it was received and where it sits. It takes two minutes, and it settles most later arguments.
Bryan
Buying or selling in Metro Detroit?
If you are buying, start with people who will walk you through the deposit and contingency terms. Our independent rankings cover real estate agents and mortgage lenders across Wayne, Oakland and Macomb counties, and providers cannot pay for placement.
If you are on the other side of the table and need to sell fast, see our ranking of the best cash home buyers in Metro Detroit, and our guide to the cash closing timeline to see how a 7 to 14 day sale works.
FAQ
Who usually pays earnest money in Michigan?
The buyer. The State Bar of Michigan says the buyer will usually pay the deposit when the purchase agreement is signed. The agreement should say how much, who holds it and how it is applied, returned or forfeited.
How is an earnest money deposit recorded?
When a broker holds it, the broker must deposit it in a trust or escrow account within two banking days after notice that all parties accepted the offer, and keep chronological and transaction-specific records. If a title company holds it, ask for a written receipt showing the amount, date and holder.
Does earnest money need to be a cashier’s check?
Not by Michigan statute that we found. Your contract sets the form. The GMAR purchase agreement lists a check, money order, cashier’s check or certified funds, so confirm with the holder which method it accepts.
Can I get my earnest money back in Michigan?
Yes, if you terminate properly under a contingency such as inspection, appraisal, financing or title, or if the seller defaults. If you default, your contract may let the seller keep it as liquidated damages. Check your own agreement’s wording and deadlines.
What happens if the buyer and seller disagree on who gets the deposit?
If a broker holds it, the money stays in the trust account until you both agree in writing or a court orders disbursement. The broker can also ask a court to take the funds through an interpleader action.
Sources
- State Bar of Michigan, Real Property Law Section: Purchase and Sale of a Home
- Michigan Realtors, A Dozen Things About EMDs (October 2020)
- Michigan Realtors, Legal Hotline Companion (2023)
- Michigan Realtors, Earnest Money Deposits (August 2013)
- MCL 339.2512, Michigan Legislature
- GMAR Sales Contract
- GMAR Purchase Agreement
- GMAR Guide to Interpleading Earnest Money Deposits
- Howard v Winston, Michigan Court of Appeals (2026)
- McKind v Palms Investments, Michigan Court of Appeals (2007)
- Livonia Gateway Investments v Brook Property Holding, Michigan Court of Appeals (2019)
- LegalClarity, Michigan Earnest Money Deposit Law