How Does Escrow Handle the Earnest-Money Deposit?
By JC Pacific Corp Published 2026-09-01 Last professionally reviewed: September 2026
Escrow generally receives the earnest-money deposit, holds it according to the contract and instructions and credits it within the final settlement if the purchase closes.
Deliver the Deposit Safely
Before sending funds:
- Use the verified escrow contact information
- Confirm the amount and deadline
- Confirm account instructions by a known telephone number
- Do not trust a last-minute email change
- Save proof of delivery
- Confirm receipt
What Happens at Closing?
The deposit is generally credited toward the buyer's required funds.
What Happens if the Transaction Is Canceled?
Escrow may require mutually executed cancellation and release instructions or another legally sufficient basis before releasing disputed funds.
Frequently Asked Questions
Can escrow decide who receives a disputed deposit?
Escrow generally does not independently decide contested legal rights.
Is the deposit kept in the escrow officer's personal account?
No. Legitimate escrow funds must be handled through appropriate trust or escrow accounts.
Can I pay with cash?
Follow escrow and lender requirements. Undocumented cash can create significant compliance and financing problems.
Earnest-money fraud can occur early in the transaction, not only at final closing. Always verify transfer instructions by telephone using a known, independently confirmed number.
Wire-fraud warning
Always verify wire instructions by telephone using a known, independently confirmed number. Never rely on email instructions alone. If you suspect fraud, contact your bank, escrow, your agent and law enforcement immediately.
Read our wire-fraud protection guideRelated guides
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JC Pacific Corp is an Irvine-based Southern California brokerage helping buyers navigate offers, escrow, and financing. Tell us what you are looking for and we will point you to current options across the region.
A note on legal advice: These guides provide general, educational information about California real estate practice. They are not legal advice and do not create an attorney-client relationship. Mortgage information is general education, not individualized lending, tax or legal guidance. For advice about your specific offer, contract, closing or financing, consult a qualified California real estate attorney and a qualified mortgage professional.