Thinking about making an offer on a home in Covington or anywhere in St. Tammany Parish? One of the first questions you will face is how much earnest money to put down and what happens to it if plans change. It is a big topic because your deposit protects the seller and, with the right contract terms, protects you too.
In this guide, you will learn what earnest money is, how it is handled in Louisiana, typical amounts around Covington, and the contingencies that keep your money safe. You will also get local tips on flood risk, notaries, and closing customs so you can move forward with confidence. Let’s dive in.
Earnest money, explained
Earnest money is your good‑faith deposit that shows a seller you are serious. It is held in escrow and, if the deal closes, it is credited toward your purchase at closing. If you cancel for a reason allowed in your contract, you typically get it back. If you default after your contingencies expire, the seller may be allowed to keep the deposit as liquidated damages, depending on your contract.
In many markets, deposits are either a flat dollar amount for lower‑priced homes or a percentage of the price, often in the 1 to 3 percent range. Local conditions in St. Tammany Parish can push amounts up or down, so you should weigh the property price and the competition for that home.
How Louisiana handles your deposit
In Louisiana, your contract names who will hold the deposit. Common escrow holders include title companies, Louisiana civil‑law notaries who close real estate transactions, attorneys, or a broker’s trust account. The holder must keep your funds in a fiduciary account and follow accounting rules.
Brokers follow Louisiana Real Estate Commission rules on client funds. Title companies and notaries follow their own fiduciary procedures. You should receive a written receipt and confirmation that your money was deposited into the named escrow or trust account.
How much to offer in Covington
There is no one‑size‑fits‑all number. Around Covington and the broader Northshore, buyers often use either a flat amount for entry‑level homes or a percentage for higher price points. As a general reference, many buyers consider 1 to 3 percent of the purchase price when competition is steady. In a highly competitive situation, you may choose to strengthen your offer.
Ask your agent what is customary this month for your price range and neighborhood. Your goal is to offer enough to demonstrate seriousness without putting more at risk than needed.
When and how to deliver earnest money
Your purchase agreement sets the deadline for delivery. A common timeline is within 48 to 72 hours after the seller accepts your offer, but the exact timing is negotiable. Make sure the contract clearly states the escrow agent’s name and delivery instructions.
Acceptable payment methods vary by escrow holder. Many accept wire transfers, cashier’s checks, or certified checks. Always get a dated receipt and keep proof of delivery and deposit. Save copies of checks, wire confirmations, and related emails for your records.
Protect against wire fraud
Wire transfers are convenient, but they are a target for scammers. Before you wire funds, call the escrow office using a phone number you already know or can verify independently. Confirm the account name and number verbally. Do not rely on phone numbers or links inside a new email. If you cannot verify safely, ask about delivering a cashier’s check in person.
Protect your deposit with contingencies
Contingencies let you investigate and, if needed, cancel within agreed timelines while keeping your earnest money. Your contract should spell out each contingency, the deadline, and what happens next.
Inspection contingency
This gives you time to inspect the property, request repairs or credits, or cancel if you cannot reach agreement. The timeline should be clear and realistic so you can complete inspections and negotiate in good faith.
Financing contingency
If you are getting a loan, make your contract contingent on receiving mortgage approval by a specific date. If your financing is denied despite good‑faith efforts, your deposit is typically refundable under the contract.
Appraisal contingency
If the appraisal comes in below the purchase price, an appraisal contingency allows you to renegotiate or cancel. If your contract waives this protection, be sure you can cover any gap your lender will not finance.
Title and survey contingencies
You should have time to review the title commitment and request that the seller cure title defects. A survey or boundary review is also important, especially where drainage or easements could affect your plans for the property.
HOA document review
If the home is in an association, include time to review covenants, rules, budgets, and fees. You want to confirm that the community’s requirements fit your needs before your contingencies expire.
Flood and hazard contingency
Flood risk is a key factor in St. Tammany Parish. Include time to review flood maps, any available elevation certificate, and insurance options and costs. If flood insurance is required and the coverage is unavailable or not affordable, your contingency should allow you to cancel and recover your deposit.
Key contract details to confirm
Clear, specific language prevents confusion and protects your money.
Name the escrow agent
Write the full name and contact details of the title company, notary, attorney, or broker who will hold the funds. Include where and how the deposit will be delivered.
Delivery method and receipt
State whether you will pay by wire, cashier’s check, or other form. Require a written receipt and confirmation of deposit into the escrow or trust account.
Contingency deadlines
Spell out each deadline and what happens if a deadline is missed. If you need more time for inspections, title, or financing, ask for an extension in writing before the deadline.
Liquidated damages language
Many Louisiana contracts state that if a buyer defaults after contingencies, the seller may keep the deposit as the sole remedy. Make sure you understand this clause and that it is reasonable and consistent with Louisiana law.
Release and dispute instructions
The contract should describe how funds are released if both parties agree, usually by joint written instructions. If there is a dispute, the escrow holder will generally keep the funds until there is a written agreement or a court order. Some contracts call for mediation or arbitration.
What happens in common scenarios
- The sale closes: Your earnest money is applied to your purchase price at closing.
- You cancel under a valid contingency: Your deposit is returned according to your contract and the escrow holder’s procedures.
- You default after contingencies expire: The seller may be allowed to keep your deposit under the liquidated damages clause, or may pursue other remedies depending on the contract and Louisiana law.
- The seller defaults: You can usually recover your deposit and may have additional remedies, including specific performance or damages, subject to your contract.
Covington and St. Tammany local tips
- Flood due diligence: Review current flood maps, request any elevation certificate, and get insurance quotes during your contingency window. Lenders will require flood insurance if the property is in a Special Flood Hazard Area.
- Notary‑led closings: In Louisiana, notaries often prepare and record the act of sale. Title companies and notaries commonly coordinate closings and act as escrow holders, so confirm who holds your deposit and where it is kept.
- Market conditions: Covington remains a desirable Northshore market. Your deposit size and contingency strength may differ from one neighborhood or price segment to another. Ask for up‑to‑date guidance before you write the offer.
- Closing costs and roles: Louisiana customs differ from other states. Clarify in your contract who pays notary, title, recording, and related fees.
Quick buyer checklist for Covington
Before you sign your offer:
- Ask your agent about the customary deposit amount for your price range today.
- Name the escrow agent in the contract and include contact details.
- State your exact deposit amount, due date, and payment method.
- Require a written receipt upon delivery and deposit.
Confirm contingency language and timelines:
- Inspection, financing, and appraisal contingencies with clear dates.
- Title review and survey or boundary contingency.
- Flood and insurance review period with the right to cancel if needed.
- HOA document review period, if applicable.
Keep thorough documentation:
- Dated receipt and proof of deposit into escrow or trust.
- Copies of wire confirmations and notes from any verification calls.
- Inspection reports, title commitment, survey, any elevation certificate, and insurance quotes.
If a dispute arises:
- Ask the escrow holder for the escrow instructions and status of the funds.
- Follow the contract’s mediation or arbitration steps if required, or consult a local real estate attorney about next steps.
Final thoughts
Earnest money is a simple idea that carries real weight. With a clear contract, reasonable timelines, and the right contingencies, you can compete confidently in Covington while protecting your deposit. Work closely with your agent, confirm who is holding your funds, and keep written records at each step.
Ready to craft a strong offer or fine‑tune your contingency timelines? Reach out to Unknown Company for local, step‑by‑step guidance that keeps you protected.
FAQs
How does earnest money work in Louisiana home purchases?
- It is a good‑faith deposit held in escrow and credited to your price at closing. If you cancel under a valid contingency on time, it is typically refunded. If you default after contingencies, the seller may keep it per contract.
Who holds earnest money in Covington and St. Tammany Parish?
- A named escrow agent holds it, commonly a title company, a Louisiana notary who closes real estate, an attorney, or a broker’s trust account.
How much earnest money should I offer on a Covington home?
- Many buyers use a flat amount for lower prices or 1 to 3 percent of the price for higher tiers. Ask your agent about current local norms and competition.
When is the earnest money due after my offer is accepted?
- Your contract sets the deadline. A common timeline is within 48 to 72 hours of acceptance, but it can be longer or shorter if both sides agree.
How can I protect my deposit during due diligence?
- Use clear inspection, financing, appraisal, title, survey, HOA, and flood contingencies with specific deadlines, and request extensions in writing if needed.
What should I know about flood risk and my deposit in St. Tammany?
- Review flood maps, elevation data, and insurance quotes during your contingency period. If insurance is required and not affordable or available, a flood contingency can allow cancellation with a refund.
What happens if the seller and I disagree about releasing the deposit?
- The escrow holder usually keeps the funds until both parties provide joint written instructions or a court order directs release. Your contract may call for mediation or arbitration.
