By Prerna Kapoor, CLHMS | REAL Brokerage | May 14, 2026
Quick answer: Earnest money in Colorado is usually held by a title company until the deal closes or both parties sign a release. If you miss a contract deadline, your money can get stuck for weeks or even months. The way to protect it is to know your deadlines cold, give written notice on time, and keep every signed form.
I had a buyer last fall who almost lost a $5,000 deposit because he didn’t formally object to an inspection finding by the deadline. The seller was within their rights to keep the money. We got it back, but only because we got moving fast and had paper to back us up. That story is not unusual. Earnest money disputes happen more often than people think, and Colorado’s standard contract has specific rules about how they get resolved.
Here is what you need to know before you write that check.
What earnest money actually is, and where it sits
Earnest money is your good-faith deposit to the seller. It says you are serious. In the Denver metro, the typical amount is 1 to 2 percent of the purchase price, though I have seen buyers go higher in competitive situations to make their offer stand out. On a $500,000 home, that is usually $5,000 to $10,000.
The money does not go to the seller right away. In almost every Colorado deal I have closed, the funds are held by the title company in an escrow account until closing. The buyer’s broker can hold it instead, but title is more common because title is already involved and has a fiduciary duty to both sides.
At closing, the earnest money is credited toward your down payment and closing costs. If the deal does not close, what happens depends entirely on why.
The contract deadlines that put your money at risk
Free Colorado Real Estate Guides
Prerna's no-fluff buyer & seller playbooks — built from real Colorado deals.
Or ask Prerna’s assistant a question directly — chat icon, bottom right.
Colorado uses a standard form called the Contract to Buy and Sell Real Estate. It is the same form for almost every residential transaction in the state, and it has a long list of deadlines built right in. Miss one, and you can lose your right to back out cleanly.
The deadlines that catch most buyers off guard:
Inspection objection. You have a set number of days, usually 7 to 10, to inspect the property and submit any objections in writing. If the inspection turns up something you cannot live with, you have to formally object before this deadline passes. After it passes, you have accepted the property as is for inspection purposes.
Inspection resolution. A few days after objection, you have a separate deadline to either reach an agreement with the seller or terminate the contract. If neither happens by this date, you are stuck.
Loan objection. Your lender needs time to underwrite your loan. If you cannot secure financing on the terms you agreed to, you have a deadline to object. Miss it, and the seller can argue you are obligated to close even without financing.
Appraisal objection. If the home appraises for less than the purchase price, you have a window to object and renegotiate. Same pattern.
Title objection. You get a title commitment showing any liens, easements, or restrictions on the property. You have a deadline to object to anything that concerns you.
Every one of these deadlines is calendar days, not business days. Weekends and holidays count. Your agent should be tracking them all and reminding you well in advance.
What happens when there is a dispute
Let’s say the deal falls apart and you want your earnest money back, but the seller disagrees. Now what?
The title company cannot just hand you the check. By Colorado law and by the language in the contract, they need either a signed Earnest Money Release form from both parties or a court order. If the seller refuses to sign, the money sits.
The standard contract sets up a path called mediation. Before either party can go to court, you are supposed to try to resolve the dispute with a neutral mediator. Most title companies will hold the funds during this period. Mediation can take a few weeks to get scheduled, and if it does not resolve the issue, the next step is small claims court or civil court, depending on the dollar amount.
The worst case scenario is something called interpleader. That is when the title company gets tired of holding disputed funds and asks a judge to take custody. The funds then sit with the court until the lawsuit is resolved. That can take months, and you will likely pay legal fees on both sides.
I tell every buyer the same thing: it is almost never worth fighting over a few thousand dollars if there is a reasonable settlement on the table. Lawyers cost more than the earnest money, and your time and stress matter too.
How to protect your earnest money before you sign
Most disputes are preventable. Here is what I tell my buyers to do every single time:
Read the contract before you write the check. I know that sounds obvious. But the standard Colorado contract is 17 pages, and most people skim it. Read the deadline section especially. Ask your agent to walk you through every single one.
Put your deadlines on a calendar. Phone reminders, paper calendar, sticky note on the fridge, whatever works. Set reminders for 48 hours before each deadline, not just the day of.
Use the right termination form. Colorado has standard forms for objections and terminations. Do not send a text message or an email saying you are out. It has to be on the right form, signed, and delivered within the deadline.
Keep proof of delivery. When you submit an objection or termination, get a signed acknowledgment from the seller’s agent or send it through a method that proves delivery. Email works if you have read receipts. Certified mail works too.
Don’t waive contingencies casually. In a hot market, agents sometimes encourage buyers to waive inspection or appraisal contingencies to win the bid. Sometimes that is the right call. But understand: if you waive the inspection contingency and then find termite damage, your earnest money is at risk if you walk.
When to get a lawyer involved
For most disputes under $5,000, hiring a real estate attorney costs more than the money in question. Mediation through the standard contract path is usually the right move.
You should get a lawyer involved when:
The earnest money is substantial (think $15,000 or more). The seller is acting in bad faith, like refusing to mediate or making threats. There is a defect with the property that was concealed and you have evidence. The deal involves multiple parties or unusual terms. Any time there are tax or 1031 exchange implications.
A 30-minute consultation with a Colorado real estate attorney usually costs $150 to $300. Sometimes that is enough to figure out whether you have a strong position. The Colorado Bar Association has a referral service if you do not already have someone.
For Japanese buyers especially, this is one of those moments where having someone who can walk you through the contract in your language matters. The standard Colorado contract is written for English speakers familiar with US real estate norms, and translation alone misses a lot of the nuance about how deadlines and dispute resolution actually work in practice.
If you have questions about how the contract protects you in any specific scenario, I am always happy to walk through it. No pressure to commit. The conversation alone often saves people from headaches down the road.
Prerna Kapoor | REALTOR® | Luxury Home Specialist
REAL Brokerage | 720-949-5450 | info@prernakapoor.com
CLHMS • RENE • PSA • ABR | International Sterling Society Award Winner
Prerna specializes in residential real estate across Parker, Aurora, Lone Tree, Castle Pines, Highlands Ranch, Cherry Creek, Greenwood Village, and Centennial. She speaks English, Japanese, and Hindi.
