Earnest money is one of the first checks or transfers a Colorado buyer may make after going under contract. It is meant to demonstrate serious intent and is generally held according to the contract until closing or another authorized disposition. At closing, it is typically credited toward the buyer's required funds.
It is not simply 'refundable' or 'nonrefundable'
Those labels oversimplify the contract. Colorado purchase contracts contain deadlines and provisions that may allow a buyer to terminate under specified circumstances, including issues involving inspection, title, appraisal, financing, insurance and other agreed contingencies. Whether earnest money is returned depends on the actual contract language, the reason for termination, whether notice was delivered correctly and whether the applicable deadline was met.
Deadlines protect rights only when they are used correctly
A buyer who has a contractual right to terminate should not assume that verbally telling someone there is a problem is enough. Colorado contracts rely heavily on written notices and defined deadlines. Missing a deadline or failing to use the required notice can materially change the buyer's position.
A stronger offer can increase earnest money, but that increases exposure too
In a competitive situation, a buyer may offer a larger earnest-money deposit to signal confidence. That can strengthen the offer, but the buyer should understand what happens if the transaction later terminates outside a protected contractual right or the buyer defaults. The amount should be part of the offer-risk discussion, not an automatic percentage chosen without context.
Release disputes are different from entitlement
Even when one side believes the contract clearly entitles them to the earnest money, the holder may need appropriate written authorization or another legally sufficient basis to release disputed funds. A disagreement about earnest money can become a legal issue quickly. That is why the safest approach is to preserve contractual rights in real time rather than trying to reconstruct them after a deadline passes.
For buyers, earnest money should be viewed as real money placed behind a contract with defined escape routes and obligations. Know the amount, know where it is being held, know the deadlines and know which contingencies actually protect you before signing the offer.
Source: Colorado Real Estate Commission 2026 Residential Contract to Buy and Sell Real Estate and related Commission forms. This is general real-estate information, not legal advice.
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