NYC 10% Contract Deposit: Who Holds It and When It’s at Risk

In NYC, buyers usually wire a deposit of 10% of the price when they sign the contract, and the seller’s attorney normally holds it in an escrow account until closing. You get it back if the deal ends under a contract protection such as the mortgage contingency or a co-op board rejection. You can lose it if you back out or miss your obligations without such a protection.

The 10% figure and the escrow arrangement are custom, not law. Your contract sets the amount, who holds it, and what happens to it. Here is how it usually works and where buyers get hurt.

Contract deposit vs down payment

The contract deposit is part of your down payment, not an extra cost. If you buy a $900,000 condo with 20% down, your down payment is $180,000. You wire $90,000 (10%) at contract, and that money goes toward the $180,000 at closing. You bring the other $90,000, plus closing costs, on closing day. Outside New York this money is often called earnest money and is usually a smaller share of the price.

Because the deposit is 10% even when you put only 10% down, a buyer with a 10% down payment often has their whole down payment at risk from the day the contract is signed. That is why the contingencies below matter so much.

Who holds the deposit and how

1. 1

   Resales: the seller’s attorney as escrow agent

   In a typical NYC co-op, condo or house resale, the contract names the seller’s attorney as escrow agent. The money goes into an attorney escrow account, separate from the attorney’s own funds, and stays there until closing or until the contract says it must be released. The contract usually covers whether the account earns interest and who gets that interest.
2. 2

   New developments: an escrow agent under the offering plan

   When you buy from a sponsor under an offering plan, state law treats your deposit as your money held in trust. Under General Business Law §352-h the sponsor must hold it in trust and can’t mix it with its own funds, and any agreement to waive that protection is void. The same section says it does not stop a sponsor from acting against a buyer who defaults, so the purchase agreement and offering plan still decide when you can lose it. §352-e(2-b) lets the Attorney General require deposits on co-op and condo offerings to be kept in a special escrow account until the unit is delivered. The offering plan names the escrow agent and bank. See buying a new development condo.
3. 3

   Release at closing

   At closing, the escrow agent releases the deposit to the seller as part of the price. The Closing Disclosure (or the attorneys’ closing statement on a co-op) shows it as a credit to you.

When you get the deposit back, and when you could lose it

In many NYC contracts, if the buyer defaults, the seller’s remedy is to keep the deposit as liquidated damages. That means the seller keeps the money instead of suing for more. The exact wording varies, so ask your attorney how your contract handles a buyer default.

How contingencies protect the deposit

Mortgage contingency

If you can’t get a loan commitment by the date in the contract, after applying on time and in good faith, you can cancel and get the deposit back. Read the mortgage contingency guide for how commitment dates and conditions work.

Board approval (co-ops)

Co-op contracts are conditioned on board approval. If the board turns you down, you get your deposit back. A board rejection caused by your own failure to cooperate, such as not submitting the package, can be treated differently. See rejected by a co-op board.

Inspection and attorney review

In NYC, inspections and due diligence normally happen before you sign, not as contingencies after. Once you sign, “I found a problem in the building financials” usually isn’t a way out. Finish your inspection and due diligence first.

Can you put down less than 10%?

Sometimes. Sellers may accept a smaller deposit, such as 5%, especially in a slower market or a new development with its own deposit rules. Some sponsors take the deposit in stages. A smaller deposit puts less money at risk, but it can make your offer weaker. Negotiate the amount before the contract is drafted, not after.

Wiring the deposit safely

• Get the escrow wiring instructions from your own attorney, and confirm them by phone at a number you already have.
• The CFPB warns: never follow wiring instructions that arrive only by email, and be suspicious of last-minute changes.
• After you wire, call to confirm it arrived. If something looks wrong, call your bank right away to ask for a recall and report it to the FBI at ic3.gov.

More in real estate wire fraud.

Common questions

Does the deposit earn interest?

Only if the contract and the escrow arrangement say so. Many attorney escrow accounts for short deals hold the money without meaningful interest. For large deposits, ask your attorney whether an interest-bearing account is possible and who receives the interest.

How fast do I get it back if the deal dies?

It depends on the contract. Escrow agents usually release funds only with both sides’ written agreement or a court order, and some contracts give the other side a few days to object. If the seller disputes your cancellation, the money can stay in escrow until the dispute is resolved.

Is a deposit the same as a binder?

No. In NYC, offers are typically made without money changing hands, and the deposit is paid only at contract signing. Be wary of anyone who asks for a deposit before there is a signed contract, especially by wire.

This guide is general information, not legal advice. Your contract controls, so ask your attorney before you sign or wire.