Earnest Money and the Due Diligence Period in Georgia: How the Clock Actually Works

Earnest money is the part of a Georgia contract most people can name and fewest people can explain. It is not a fee, it is not a deposit toward closing costs in any automatic sense, and it is not what makes the contract binding. What it is, in practice, is a sum of money sitting in a third party's escrow account while the buyer decides during the due diligence period, and the rules governing who can move it and when are worth knowing before you are the one arguing about it.

This is a process explainer covering how earnest money is held in Georgia, how the due diligence period actually works, and what changed in the 2025 and 2026 contract forms. It is not legal advice. Any specific contract question should go to a licensed Georgia attorney, and any question about how your broker handles funds should go to your broker.

Who Holds Earnest Money in Georgia, and Under What Rules?

Two layers apply: state law and commission rule.

The Statute

O.C.G.A. section 43-40-20 requires that all down payments, earnest money deposits, or other trust funds received by a broker or the broker's affiliated licensees on behalf of a principal or any other person be deposited into a designated trust or escrow account. Each broker accepting such funds must maintain a separate, federally insured account at a financial institution in this state designated a trust or escrow account, and a broker who does not already have one must open it within one business day of receiving trust funds.

The statute also draws a hard line on the broker's own money: a broker is not entitled to any part of the earnest money, security deposit, or other trust funds paid in connection with a real estate transaction as part or all of the broker's commission or fee until the transaction has been consummated or terminated. An account designated and registered with the commission is not subject to attachment or garnishment.

The Commission Rule

Georgia Real Estate Commission Rule 520-1-.08 governs the mechanics. A licensee must place all cash, checks, or other items of value received in a brokerage capacity into the custody of the broker holding the licensee's license as soon after receipt as is practicably possible. Unless otherwise agreed to in writing by the parties at interest, the broker must promptly deposit those funds in a federally insured account designated as a trust account and registered with the Commission. Brokers must also cause a written reconciliation statement to be made at least monthly, comparing total trust liability against the reconciled financial institution balance.

Notice what the rule does not say. It sets no fixed number of days. The standard is "as soon after receipt as is practicably possible" and "promptly." Any source telling you Georgia requires a deposit within a specific number of banking days is describing a contract term, not a Commission rule. That clause about the parties agreeing otherwise in writing is precisely what allows the contract to set its own deadline and name its own holder.

The Contract Deadline

The standard Georgia Association of Realtors purchase and sale agreement sets its own timeline: earnest money is deposited into the Holder's escrow or trust account not later than five banking days after the Binding Agreement Date, with a banking day defined as a day on which a bank is open to the public for carrying out substantially all of its banking functions. The 2026 forms package also tightened two related seller rights, reducing the seller's window to request evidence of the buyer's ability to close from seven days to five, and the seller's termination window from three days to two.

The Holder is a role defined in the contract, and it is not automatically the listing broker. The form contemplates a closing attorney serving as Holder using separate exhibits, or a mortgage lender in the transaction. The form also allows the Holder to charge the buyer for costs associated with receiving the earnest money, collected separately from the earnest money itself.

What Happens When the Parties Disagree About Earnest Money?

This is where the two layers separate again.

What the Rule Permits

Rule 520-1-.08(3) lists the circumstances under which a broker may disburse trust funds: on rejection of an offer, on withdrawal of an offer not yet accepted, at the closing of the transaction, on securing a written agreement signed by all parties having an interest in the funds, on the filing of an interpleader action or the order of a court of competent jurisdiction, or on a reasonable interpretation of the contract that directed the broker to deposit the funds. Subsection (3)(c) adds that when a broker makes a disbursal to which all parties do not expressly agree, the broker must immediately notify all parties in writing.

The rule imposes no waiting period measured in days.

Where the Ten Day Notice Comes From

The commonly cited ten day notice is a contract term. The GAR agreement provides that the Holder may disburse the earnest money on a reasonable interpretation of the agreement, provided the Holder first gives all parties at least ten days notice, and that if a dispute cannot be resolved after a reasonable time, the Holder may interplead the funds into a court of competent jurisdiction. GAR added a new form in the 2026 package, F528, titled Holder's Notice to all Parties, which formalizes that notice step.

Interpleader is worth understanding as the endpoint. It means the Holder hands the money to a court and lets the parties argue in front of a judge. It is slow and it costs money, which is why most disputes settle before reaching it.

How Does the Due Diligence Period Work?

Georgia's due diligence period is unusually favorable to buyers, and the contract language is explicit about why.

An Option Contract

The GAR agreement states that during the due diligence period the agreement shall be an option contract during which time the buyer has the option, for any reason or for no reason, to terminate upon notice to the seller, with notice given prior to expiration of the period. The buyer and the buyer's representatives also have a continuing right through closing to enter the property at the buyer's expense at reasonable times.

The length is a blank to be filled in. The form reads that the property is being sold subject to a due diligence period of a stated number of days from the Binding Agreement Date. Georgia sets no statutory length. It is whatever the parties negotiate, which is why due diligence length has become one of the real levers in a competitive offer.

The Earnest Money Follows the Termination

A buyer terminating during the due diligence period is entitled to a return of the buyer's earnest money without penalty. After the period expires, the buyer's right to terminate narrows considerably, and on a buyer default the contract directs the Holder to disburse the earnest money to the seller as liquidated damages in full settlement, where the Holder makes a reasonable interpretation that the agreement terminated due to that default.

That is the whole economic shape of the thing. Before the deadline, the money comes back. After the deadline, it is at risk. Everything else in the negotiation is a variation on where that deadline sits.

What About the Other Contingencies?

Due diligence is one lever. Three others carry their own mechanics.

The Financing Contingency

The GAR financing contingency exhibit requires the buyer to apply for the loan within a stated number of days from the Binding Agreement Date and deliver documentation confirming the application. During the contingency period the buyer is deemed to have the ability to obtain the loan unless the buyer gives the seller a valid loan denial letter from a Georgia licensed lender based on customary underwriting criteria. The exhibit lists bases that do not make a denial letter valid, including insufficient closing funds, failure to sell or lease other property unless specified in the agreement, untimely provision of information, and intentional material changes to the buyer's financial condition. If the buyer is not terminating, the buyer must deliver proof of ability to close in the form of a loan commitment stating type, amount, and terms. Under the 2026 forms, loan denial letters must now state the reason for denial.

The Lender's Valuation Contingency

When the lender's valuation comes in below the contract price, the mechanism is an amendment rather than an automatic termination. The buyer submits an amendment to the purchase price along with the report within a set number of days. The seller then has three days to accept, reject, or counter. If no agreement is reached, the buyer gets an additional three days to terminate without penalty. The form is explicit that if the buyer does not terminate within that window, the right to terminate for failure to agree is waived and the buyer closes at the original price.

Two naming changes are worth noting for anyone comparing an older contract to a current one. In the 2026 package, the Amendment to Sales Price became the Amendment to Purchase Price, and the ATSP abbreviation became ATPP, across several forms. In the 2025 package, the valuation contingency in form F404 moved from paragraph 13 to paragraph 14, with added language regarding the buyer not seeking a reduction in sales price.

The Sale of Buyer's Property Contingency

This exhibit requires the buyer to use good faith efforts to sell or lease the other property before the end of the contingency period and, if it is not already under contract, to keep it actively listed at a stated maximum price. If the sale does not close or the lease is not executed by the deadline, the agreement terminates at that time. The kick out clause gives the seller a path forward: when the seller receives a preferred offer, the seller notifies the buyer, and the buyer then has a stated number of hours after receipt to deposit additional earnest money and sign an amendment removing the contingency. If the buyer does not, the agreement terminates and the buyer is entitled to a full refund of earnest money. Georgia Association of Realtors materials note that the seller can only exercise a kick out if both parties specifically agreed to include it, and that buyers must promptly disclose entering a contract to sell their existing property. The 2026 package modified the kick out provisions with new language regarding the buyer's ability to waive.

Is Earnest Money Actually Required?

Neither the statute nor the Commission rule requires a buyer to pay earnest money. Both govern only how a broker handles it if it is received. The standard contract leaves the amount blank and negotiable, and states no minimum. A brokerage resource we reviewed argues the agreement can be valid without an earnest money deposit because the consideration can be the mutual promises of the parties, though that is a brokerage view rather than a legal authority citing statute or case law.

On amounts, we found no dataset specific to Georgia, Cobb, Cherokee, or Paulding. The National Association of Realtors describes a national range of one to ten percent of the purchase price, larger in competitive markets and closer to one to two percent in buyer's markets. Anyone quoting you a precise local norm is describing their own experience, which is useful but is not data.

What Changed in 2025 and 2026

On the license side, the only adopted change of note took effect July 1, 2025: Georgia brokers are now required to complete a minimum of eighteen continuing education hours on broker specific topics, with qualifying courses covering training licensees, supervising licensees, reviewing brokerage agreements, or managing a firm. The Commission's own website carries the rule change notice. A Commission law update compilation dated April 2025 lists no changes to trust account or earnest money rules.

On the forms side, the 2025 package modified earnest money language across several agreements and updated the holder sections with new language regarding reimbursement of fees. It also changed the statute of limitations from two years to one year across nearly all forms, replaced the word commission with compensation, and retitled electronic signatures as digital signatures. The 2026 package added new earnest money language and capitalized banking days, tightened the seller's evidence and termination windows described above, added new forms including F528, and introduced an insurance contingency allowing buyers to terminate if required coverage is unavailable, including in cash transactions. The current package is available through the Georgia Association of Realtors contract forms page, which is restricted to members and other licensees who have purchased a license to use the forms.

Buyers preparing to write an offer will find related ground in our Kennesaw home buyer's guide and in our piece on how to get an offer accepted in a competitive market.

Frequently Asked Questions

Do you get earnest money back if you terminate during due diligence in Georgia? Under the standard Georgia contract, yes. During the due diligence period the agreement functions as an option contract, and a buyer who terminates for any reason or no reason before the deadline is entitled to a return of the earnest money without penalty.

How quickly must a broker deposit earnest money in Georgia? The Commission rule sets no fixed number of days. It requires the licensee to deliver funds to the broker as soon after receipt as is practicably possible and the broker to deposit them promptly, unless the parties agree otherwise in writing. The standard contract sets its own deadline of five banking days after the Binding Agreement Date.

What happens if the buyer and seller both claim the earnest money? The Commission rule allows disbursal on a written agreement signed by all parties, on a court order, on filing an interpleader action, or on a reasonable interpretation of the contract, with written notice to all parties. The standard contract requires the Holder to give at least ten days notice before disbursing on its own interpretation.

Is earnest money required to make a Georgia contract valid? Georgia's license statute and Commission rules govern how earnest money is handled but do not require a buyer to pay it, and the standard form leaves the amount blank.

Conclusion

Earnest money is a deadline dressed up as a deposit. Before the due diligence period closes, it is refundable and the buyer holds the option. After it closes, it is exposed and the contingencies that remain each have their own narrow procedure and their own clock. The forms change annually, and the 2026 package tightened several of those clocks, so a buyer working from an older understanding of the contract is working from the wrong deadlines.

Clareo Group, powered by The Agency Atlanta, negotiates these terms across Cobb, Cherokee, and Paulding every week, and we walk clients through what each date on the contract actually obligates them to do. Reach out before you write the offer and we will map the timeline for the specific deal in front of you.