Confused about how much earnest money to offer in West Hollywood or what happens to your deposit once escrow opens? You are not alone. In Central LA’s luxury market, deposit size, timing, and contingencies can decide whether your offer wins and how protected you are if something changes. This guide explains how earnest money works in California escrow, what is typical in West Hollywood, how contingencies protect you, and smart ways to structure deposits for single-family and condo purchases. Let’s dive in.
Earnest money basics in California escrow
Earnest money is a good faith deposit that shows you are committed to buying. In California, the deposit is held by a neutral third party in escrow, usually a licensed escrow or title company. Escrow holders operate under written instructions from the signed purchase agreement and any addenda.
Escrow and title companies in California are subject to state oversight. Escrow handling and licenses are regulated by the state, including oversight from the California Department of Financial Protection and Innovation and guidance from the California Department of Real Estate. These agencies set standards for how client funds are received, held, and accounted for.
Once both parties sign the purchase agreement and you deliver the deposit, escrow opens. The escrow holder follows the contract and written instructions. If the deal closes, your deposit is applied to the purchase price and closing costs. If the deal cancels under an allowed contingency within the stated time, escrow typically returns the deposit per the contract or a mutual release.
Who holds the deposit and why it matters
Your funds should never be sent to the seller directly. Deposits are placed with escrow or title, or in some cases with a broker’s trust account if the broker is acting consistent with state rules. Brokers who handle client funds must follow strict accounting and delivery rules under DRE guidance.
Always confirm the escrow holder’s full legal name and licensing before wiring funds. Request written wire instructions, send funds by bank wire or certified funds, and obtain a receipt. If a dispute arises, escrow will hold the funds until the parties agree in writing or a mediator, arbitrator, or court directs disbursement.
Typical deposit sizes in West Hollywood
There is no fixed percentage set by law. Across many California transactions, initial deposits often fall in the 1 to 3 percent range of the purchase price. In West Hollywood and the greater Central LA luxury segment, it is common to see larger deposits or staged deposits to stand out in a competitive field.
For higher price points, buyers frequently offer several percent of the purchase price, sometimes 3 to 5 percent or more. Many structure the total in phases to align with contingency removals. The right number depends on price tier, competition, and your comfort with risk.
When deposits are paid and how they move
Your initial deposit is usually due within the timeline stated in the offer, often 24 to 72 hours after acceptance. Additional deposits may be scheduled at clear milestones, such as after your inspection period or when you remove a financing contingency. Escrow will confirm when funds are received and cleared.
Use secure wires or certified funds per the escrow holder’s written instructions. Avoid sending funds before you verify the instructions through a known phone number for the escrow office. Keep records of every transfer.
Contingencies that protect your deposit
Contingencies are conditions that must be satisfied for the purchase to move forward. If you cancel within a valid contingency period and follow the contract’s notice steps, your deposit is typically refundable. You can learn more about common contingency types from the National Association of Realtors.
Inspection and investigation
Most buyers include an investigation period to complete physical inspections and review disclosures. In this window you can hire inspectors for systems, structure, and pests, and request credits or repairs. If the property does not meet your expectations and you cancel during the inspection period, your deposit is usually returned per the contract.
Financing and appraisal
Financing and appraisal contingencies protect you if your loan terms are not approved or if the appraised value falls short. With these in place, you can often renegotiate or cancel if the lender will not fund or the appraisal is low. If you waive these contingencies and later cannot close, your deposit may be at risk.
Title and HOA documents for condos
In West Hollywood condos, the HOA document package matters. You will review budgets, reserves, insurance, CC&Rs, rules, and any litigation or special assessments. If the documents disclose material issues you are not comfortable with, you can cancel within the HOA review period and preserve your deposit.
Other common protections
Title review and statutory disclosures are standard. Some buyers also have a sale-of-buyer’s-property contingency, although this is less common in competitive Central LA markets. Timelines for any contingency can be negotiated shorter or longer depending on market leverage.
When your deposit becomes nonrefundable
Your deposit becomes more exposed when contingencies expire or are removed in writing. If you remove a contingency and later default, the seller may have contractual remedies that include keeping the deposit as damages, subject to the agreement’s terms.
Many California contracts include a liquidated damages option. If properly drafted and initialed, this clause can allow the seller to retain the deposit if the buyer defaults. For background on state forms and clauses, review the California Association of Realtors resources. The exact outcome depends on the agreement’s language and the facts.
If the buyer and seller disagree about the deposit, escrow will generally hold the funds until both parties sign a release or a mediator, arbitrator, or court directs disbursement. Escrow can also interplead the funds with the court if needed.
Smart strategies for luxury buyers
A thoughtful deposit plan can improve your odds while protecting your downside. Consider these approaches in West Hollywood and Central LA:
- Align size with protections. Offer a competitive deposit only if your contingency periods and review rights are realistic for inspections, appraisal, loan, and HOA review.
- Use staged deposits. Start with a meaningful initial deposit, then increase after key milestones such as investigation or loan approval. This shows commitment while limiting early risk.
- Set realistic timelines. Compressed contingency windows can look strong, but only shorten if your lender and inspectors can perform quickly.
- Be financing ready. Obtain full pre-approval, share your lender contact, and respond fast to conditions. This supports a shorter loan contingency without unnecessary risk.
- Keep strong HOA review rights for condos. Define your HOA document review period and what happens if reserves are low or assessments are pending.
- Confirm escrow details in writing. Verify licensing through the DFPI and request written receipts for all deposits.
Step-by-step: What escrow does with your deposit
Offer accepted. Buyer and seller sign the purchase agreement and open escrow.
Initial deposit due. You wire funds to escrow within the contract deadline and receive a written receipt.
Escrow holds funds. Money is held per written instructions while you complete inspections, appraisal, and loan steps.
Additional deposits. If your deal includes staged deposits, you send the next installment when the contract requires, often tied to a contingency removal.
Contingency decisions. You remove or maintain contingencies in writing by each deadline. If you cancel within a valid contingency period, escrow prepares to return funds per the agreement.
Closing. If you proceed, the deposit is applied to your purchase on the closing statement, and you wire any additional funds needed to close.
If there is a dispute. Escrow will not release the deposit until both parties sign a release or there is a directive from mediation, arbitration, or the court. For client funds handling, see the DRE guidance.
Real-world scenarios
- Buyer cancels within inspection period. You discover roof and system issues, cannot agree on a credit, and cancel before the inspection deadline. Your deposit is returned.
- Appraisal comes in low. With an appraisal contingency, you ask for a price adjustment. If the seller declines and you cancel within the appraisal window, your deposit is returned.
- Loan denial after removing loan contingency. You remove your loan contingency, then your lender will not fund. The seller may be entitled to your deposit under the contract’s remedies.
- HOA discovers special assessment. You receive HOA minutes and learn of a pending special assessment. You cancel within the condo document review period. The deposit is returned per the contract.
Seller perspective: Reading deposits in West Hollywood
A sizable deposit signals commitment, but smart sellers also look at structure and timelines. Staged deposits tied to contingency removals can be a balanced indicator of buyer strength. Clear deadlines and communication help reduce misunderstandings and speed resolution.
Choose a reputable escrow or title company, confirm instructions are precise, and ensure the contract spells out what happens if contingencies expire. If an offer waives major protections on day one, weigh the benefit against potential delays if financing wobbles.
Work with a local advisor you trust
In West Hollywood and Central LA, deposit strategy is part of winning the right property and closing with confidence. You deserve informed guidance on deposit size, staged timing, and contingency language that reflects your goals and the market.
If you want a private, high-touch approach to structuring offers and navigating escrow, we are here to help. For tailored advice or to access curated on and off-market options, connect with Michelle Adams.
FAQs
How much earnest money do I need in West Hollywood?
- There is no fixed amount. Many California deals see 1 to 3 percent initially, while West Hollywood luxury offers often use larger or staged deposits based on competitiveness.
Where is my deposit held in California?
- Your funds are held in escrow by a neutral escrow or title company under written instructions, with oversight from state regulators such as the DFPI.
When is my earnest money refundable in LA?
- If you cancel within valid contingency periods and follow notice rules in the contract, escrow typically returns your deposit. After contingency removal, your risk increases.
Can the seller keep my deposit if my loan falls through?
- If you have a timely loan contingency and cancel as allowed, your deposit should be returned. Without that protection, the seller may claim the deposit under contract remedies.
What if the appraisal is low on a West Hollywood home?
- With an appraisal contingency, you can renegotiate, add cash, or cancel within the deadline. Without appraisal protection, you bear the risk of a shortfall.
How fast do I need to wire the deposit?
- Most contracts call for the initial deposit within 24 to 72 hours of acceptance. Always confirm wire instructions with escrow in writing and get a receipt.
