Coastal San Diego · Buyer guides · Offer basics

Earnest money deposit in San Diego: how it works

Short answer: Earnest money is the good-faith deposit you put down after the seller accepts your offer. It shows you’re serious, but it isn’t gone the moment you sign. It sits with escrow (the neutral company that holds the money and papers) and counts toward your price when the sale is final.

Buyers ask me the same thing every time: what happens to my deposit if something goes wrong? The answer depends on your contingencies (the conditions that let you cancel) and on what you both signed.

This guide walks the process for buyers in La Jolla and around coastal San Diego. It is not legal advice.

I’m Weston Clark, Founding Member of the Dickinson-Clark Team at Compass. I help buyers in coastal San Diego write offers they understand, deposit terms included. You can talk about fees with Weston directly. This form does not give a commission quote.

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Related: Contingencies · Escrow · Offer strategy · Wire fraud · Guides · Proof of funds · Buying with non-cash assets · Final walk-through

Where the deposit goes

After the seller accepts, you send the deposit to escrow, not to the seller. Escrow holds it until the sale is final or the deal ends.

Send it only after you confirm the wire steps by phone, using a number you already trust. My wire fraud guide explains why.

What protects it

A contingency is a condition in your contract, like an inspection or loan approval, that lets you cancel within a set time. While a contingency is open, you usually can cancel the right way and get the deposit back.

Once you remove a contingency in writing, that shield is gone for that item. My contingencies guide covers each one.

What California law says

Many California purchase contracts include a liquidated damages clause. That is a set amount the seller can keep if the buyer backs out without a contract reason. Civil Code section 1675(c) says:

“If the amount actually paid pursuant to the liquidated damages provision does not exceed 3 percent of the purchase price, the provision is valid to the extent that payment is actually made unless the buyer establishes that the amount is unreasonable as liquidated damages.”

Civil Code section 1677 adds that the clause is invalid unless “The provision is separately signed or initialed by each party to the contract”. In plain words, you and the seller each have to initial it for it to count.

How the money gets released

When a deal ends, escrow usually needs signed instructions from both sides before it sends the deposit anywhere. That is why clean, written notices matter.

If buyer and seller disagree, the contract says what happens next. That is a time to talk to an attorney.

How I help you protect your deposit

• We set deposit terms you understand before you sign.
• We put every contingency date on one calendar.
• We remove contingencies only in writing, and only when you are ready.
• My offer strategy guide shows how the deposit fits the full offer.

My escrow guide walks through the rest of the process.

General information only

This guide explains the deposit process. It is not legal advice. Your contract controls. Ask an attorney about your own deal.

More on sandiego.homes

• Contingencies: your cancel rights
• Escrow: how the process runs
• Offer strategy: the full offer package
• Wire fraud: moving money with care

• More: All guides · La Jolla · Real estate terms

Talk with Weston about your offer and deposit

Tell me what you’re buying and when. I’ll walk you through deposit terms and contingency dates before you sign.

Or call (858) 997-8998 · weston@sandiego.homes · Search on Compass

Free tools: What is my home worth? · What would I take home? · Real estate words in plain English

Have another question? Quick answers to common questions

Sources

• California Civil Code § 1675
• California Civil Code § 1677
• sandiego.homes — Contingencies
• sandiego.homes — Escrow