Thinking about making an offer on a Sanibel home? Your earnest money can help your offer stand out and protect you while the deal moves forward. You want to feel confident your deposit is handled correctly, especially with island logistics, insurance questions, and many remote buyers in the mix. In this guide, you’ll learn how earnest money works in Sanibel, who holds it, what protects it, and the steps that help you avoid surprises. Let’s dive in.
What earnest money is
Earnest money is a buyer’s good-faith deposit. You put it down to show the seller you intend to follow through while inspections, financing, and title work happen. The deposit is held in escrow and is applied to your down payment or closing costs at closing.
There is no fixed amount. In many markets, deposits often land around 1 to 3 percent of the price, but Sanibel’s competitive, limited-inventory market can push amounts higher or lower by negotiation. Your exact number should match your comfort level and the property’s risk.
Who holds your deposit in Florida
In Florida, title companies commonly hold earnest money. In Sanibel and greater Lee County, many closings use a title or settlement company as the escrow holder. A broker’s escrow account or an attorney’s trust account can also hold funds.
Funds must be kept in a separate escrow account (no commingling with operating money). Your contract should name the escrow holder and state when the deposit is due. Interest is not usually paid unless your contract calls for an interest-bearing account and names who receives the interest.
When and how to deliver it
Your contract sets the delivery deadline and method. Most buyers deliver the deposit within a set number of days after the contract’s effective date. If you are remote, plan wiring early and confirm time zones and bank cutoff times.
To pay safely, verify wiring instructions by calling the escrow holder using a trusted phone number you source independently. Keep proof of delivery, like a receipt or wire confirmation. Save all emails that confirm the escrow details.
Contingencies that protect you
Contingencies are your safety net. If you follow the contract and cancel within a valid contingency window, your deposit is typically returned.
Inspection contingency
The inspection period lets you evaluate the home. If findings are unacceptable and you cancel within the inspection window as the contract describes, you usually recover your deposit. Make sure your termination notice is in writing and delivered on time.
Financing and appraisal contingencies
If you have a financing contingency and your loan is denied despite timely efforts, you can often cancel and receive your deposit back. With an appraisal contingency, a low appraisal can allow termination if the parties cannot agree on a new price, depending on the contract language.
Title and association reviews
You may have time to review title, survey results, and any condominium or homeowners association documents. If a title defect or association restriction is unacceptable and you cancel within the contract’s timelines, your deposit may be returned.
Insurance and storm considerations
In Southwest Florida, insurance availability and cost can affect closings, especially during hurricane season. Work with your agent and lender to ensure your contingencies cover insurance issues that could make the home uninsurable or unaffordable for you.
When deposits are returned or forfeited
Your deposit is typically returned if you cancel according to an active contingency or if the seller defaults. Missing a deadline or canceling without a valid contingency can put your deposit at risk.
Many Florida contracts allow the seller to keep the deposit as liquidated damages if the buyer defaults. Whether a seller chooses that remedy can depend on the contract and circumstances. Read every deadline carefully and send notices exactly as your contract requires.
What happens in a dispute
If the buyer and seller give conflicting instructions, the escrow holder will usually wait for written agreement or a court order. Some contracts require mediation or allow arbitration before going to court. Disputes can take time and add fees, so clear documentation and timely notices are essential.
If a broker holds escrow and cannot disburse due to a conflict, they must follow Florida rules for escrow disputes. Title companies have their own procedures for resolving competing claims.
Sanibel tips for buyers
- Consider the deposit size strategically. A larger deposit can strengthen your offer in a competitive, second-home market, but only if you are comfortable with the risk.
- Name a reputable local title company as the escrow holder in the contract and keep all receipts.
- Calendar every deadline (deposit due date, inspection window, loan approval date). Act before cutoffs.
- Verify wire instructions by phone to a known number to avoid fraud. Do not rely on email alone.
- For remote buyers, confirm transfer methods and timing early. Island logistics and bank cutoffs can affect same-day wires.
- Keep clear records of inspections, approvals, extensions, and any termination notices.
Sanibel tips for sellers
- Request proof of funds or a strong pre-approval with the offer, in addition to an appropriate earnest-money amount.
- Name the escrow holder in the contract to avoid confusion.
- Understand contract remedies if a buyer defaults, including any liquidated damages clause. Speak with counsel before deciding to retain a deposit.
- In multiple-offer situations, weigh deposit size, contingencies, and timelines together, not just the biggest deposit.
A simple contract-side timeline
- Offer accepted and effective date set (Day 0).
- Buyer delivers earnest money to the named escrow holder within the timeframe in the contract.
- Inspection period begins. Buyer completes inspections and either proceeds or cancels within the inspection window.
- Financing and appraisal deadlines arrive. Buyer provides approvals or cancels per the contract if needed.
- Title, survey, and association reviews are completed within stated periods.
- Closing occurs and the deposit is applied to the down payment or closing costs, or the deal cancels according to a contingency and the deposit is returned.
What to put in your contract
- Clear escrow instructions: who holds the funds, where they are delivered, and when.
- Interest terms: whether funds go into an interest-bearing account and who receives interest.
- Dispute steps: whether mediation or arbitration is required and how interpleader or court orders will be handled.
- Notice rules: exactly how and when to deliver termination or contingency notices to protect the deposit.
Final thoughts
Earnest money is a small part of your offer that carries big weight in Sanibel. When you pair the right deposit amount with clear contingencies, timely notices, and a trusted local escrow holder, you protect yourself and give your offer a competitive edge. If questions come up about defaults, remedies, or disputes, ask your agent to connect you with a local real estate attorney or title company for guidance.
If you are planning to buy or sell on Sanibel or anywhere in Lee County, let us walk beside you in the process, step by step. For caring, bilingual guidance and local expertise, reach out to Jessica Ozuna Torres. Get your instant home valuation and a clear plan for your next move.
FAQs
Where should earnest money be delivered in Sanibel transactions?
- To the escrow holder named in your contract, typically a title company, settlement agent, broker escrow, or an attorney’s trust account.
How much earnest money should I offer in Sanibel?
- There is no set rule; many markets see 1 to 3 percent as a starting guide, but Sanibel’s competitive conditions may justify a different amount based on the property and your risk tolerance.
Can I get my earnest money back if I change my mind?
- Only if you cancel within a valid contractual contingency period or if the seller defaults; canceling without a contingency risks forfeiting your deposit.
What if the seller refuses to release my deposit?
- The escrow holder typically will not disburse without written agreement from both sides or a court order; mediation or legal action may be required.
Will my earnest money earn interest in Florida?
- Not usually; interest is paid only if your contract specifies an interest-bearing account and identifies who receives the interest.
Are there unique Sanibel factors that affect earnest money?
- Yes; second-home dynamics, seasonal timing, insurance availability, and association rules can shape contingencies, timelines, and deposit strategies.
