What Is Earnest Money in Minnesota, and How Does It Work?
Earnest money in Minnesota is a good-faith deposit a buyer makes after an offer is accepted, typically 1 to 2 percent of the purchase price. Under Minnesota Statute 82.75, the default rule is that earnest money is held in the listing broker's trust account, not by a neutral escrow company as buyers from other states often expect. The deposit must be made within three business days of final acceptance of the purchase agreement. If the deal falls through due to a valid contingency such as financing or inspection, the buyer generally gets the earnest money back. If the buyer backs out without a valid contingency, the seller may have a claim to the funds.
By Darin Bjerknes | May 20, 2026
A few weeks ago, I was working with a family relocating from Chicago who was buying their first home in Woodbury. They got their offer accepted on a four-bedroom off Bailey Road, and I told them they'd be wiring $9,000 in earnest money to our brokerage's trust account within three business days. They paused. "Why does it go to your office? Shouldn't it go somewhere neutral?"
It is a fair question, and the answer gets at one of the genuinely unique features of Minnesota real estate that trips up buyers from out of state, and even some long-time local buyers who have never thought about it carefully. Here in Minnesota and Wisconsin, the default under state law is that the listing broker holds the earnest money, not a title company or independent escrow agent. That does not mean the system is rigged. It just means that if you are buying a home in Woodbury, Stillwater, Lake Elmo, or anywhere in the east metro, you need to understand how it actually works before you submit an offer.
This is the explanation I give my clients before we write an offer. Understanding the mechanics protects you.
What Is Earnest Money and What Does It Actually Do?
Earnest money is a deposit you make after a seller accepts your offer. It signals to the seller that you are a serious buyer with real financial commitment in the deal. In exchange, the seller agrees to take the home off the market while you complete due diligence: inspections, appraisal, final loan approval.
The amount is credited toward your down payment or closing costs at closing. You do not pay it twice. If you are buying a $460,000 home in Woodbury with 10 percent down and put up $4,600 in earnest money, that deposit goes toward your $46,000 down payment at the table. You just bring the remaining balance.
The earnest money also protects the seller. If you back out without a valid reason spelled out in the purchase agreement, the seller has a basis to claim those funds as compensation for taking the home off the market and missing other buyers.
How Much Earnest Money Should You Offer in Minnesota?
The standard in the Twin Cities is 1 to 2 percent of the purchase price. For a $460,000 home in Woodbury, that is roughly $4,600 to $9,200. For a $650,000 home in Lake Elmo or Stillwater, expect to put up $6,500 to $13,000.
The amount matters strategically in a competitive situation. In the spring 2026 east metro market, where 25 percent of Woodbury homes sell above asking price and inventory sits at about two months of supply, a higher earnest money deposit signals strength. It shows the seller that you have real funds committed and genuine intent to close.
I have seen buyers in the $700,000 to $900,000 range in Washington County put up 2 to 3 percent to separate themselves from competing offers. This does not increase your ultimate out-of-pocket cost since it credits at closing. It just accelerates how much you are committing upfront.
That said, only offer what you are confident you can deposit on time. The purchase agreement gives you three business days from acceptance to fund it. Missing that deadline can create grounds for the seller to challenge whether you are in default.
Who Holds Earnest Money in Minnesota? The Answer Most Buyers Do Not Expect
In most states, earnest money goes to a title company or an independent escrow company that acts as a neutral third party. Minnesota is different. Under Minnesota Statute 82.75, the default rule is that unless the parties agree otherwise in writing, the earnest money goes to the listing broker's trust account. That is the seller's agent's brokerage.
This is not unique to your deal or your agent. It is the standard practice across the state, confirmed by the Minnesota Department of Commerce and established in statute. The listing broker is required to hold the funds in a dedicated trust account separate from operating funds, and the account must be interest-bearing. The interest on those funds goes to the Minnesota Housing Trust Fund, a state program that supports affordable housing loans and grants.
That said, parties can agree in writing to use a different holder. Some buyers prefer to specify a title company in the purchase agreement, and sellers will often agree to it. If you have a preference, bring it up before the offer is submitted. Your agent can add the designation directly into the MNAR purchase agreement form.
The deposit itself must be made within three business days of either receiving the earnest money check or the final acceptance of the purchase agreement, whichever comes later, per the statute.
What Protects Your Earnest Money: Know Your Contingencies
Financing contingency. If your lender denies the loan, or the terms change materially and you can no longer qualify, you can terminate the purchase agreement under the financing contingency and receive a full refund of your earnest money.
Inspection contingency. The standard Minnesota purchase agreement includes a ten-day inspection period. If the inspection reveals conditions you find unacceptable and you choose to terminate, you are generally entitled to your earnest money back.
Home sale contingency. If your offer is contingent on selling your current home, this protects your earnest money if your existing home does not sell within the timeframe specified in the agreement.
What Happens If the Deal Falls Through?
If you terminate under a valid contingency: The listing broker should return your earnest money within the timeframe specified in the purchase agreement, typically within a few business days of both parties signing the cancellation documents.
If you back out without a valid contingency: The seller may have a claim to your earnest money as liquidated damages for pulling the home off the market.
If there is a dispute: The funds remain in the trust account until both parties agree in writing on disbursement, or until a court orders it.
If the deal falls through due to the seller: The buyer is entitled to a full refund of earnest money and may have additional claims depending on the circumstances.
Earnest Money at the Closing Table
If your deal closes as planned, your earnest money shows up as a credit on your Closing Disclosure or settlement statement. It reduces what you need to bring to closing.
Frequently Asked Questions
Q: How much earnest money should I offer in Minnesota?
The standard range in the Twin Cities is 1 to 2 percent of the purchase price.
Q: Who holds earnest money in Minnesota?
Under Minnesota Statute 82.75, the default is the listing broker's trust account.
Q: Can I get my earnest money back if my loan is denied?
Yes, if your purchase agreement includes a financing contingency and your loan is denied.
Q: What happens to earnest money when there is a dispute in Minnesota?
The listing broker holds the earnest money in trust and cannot disburse it without written agreement from both buyer and seller, or a court order.
Q: Does earnest money reduce what I owe at closing?
Yes. Earnest money is credited toward your down payment and closing costs at settlement.
How Earnest Money Works: Step by Step in a Minnesota Transaction
Step 1: Agree on the amount before submitting the offer.
Step 2: Include contingencies that protect the deposit.
Step 3: Confirm who will hold the earnest money.
Step 4: Fund the deposit within three business days.
Step 5: Track it on your Closing Disclosure at closing.
Thinking about buying in Woodbury, Stillwater, or anywhere in the east metro and want to make sure your offer is structured to protect your earnest money? Let's talk through your situation before you submit. Reach out at [email protected] or book a free consultation at calendly.com/darintheminnesotan. No pressure, just a straightforward conversation.
Darin Bjerknes | Minnesōtan, Brokered by REAL | [email protected]
Contact a licensed Minnesota real estate attorney or title company for legal questions about your specific transaction. Market statistics referenced are directional based on available data as of spring 2026; results may vary.
