Earnest Money Dispute
Whenever a contract is terminated, it isn’t uncommon for both sides to feel the earnest money belongs to them. A Seller may feel that they have removed their home from the market and are entitled to the earnest money because of the time lost in removing their home from the market. Unfortunately, unless the Buyer has defaulted on a contract provision, they are entitled to a return of the earnest money. In addition, some of the reasons a contract is terminated may not even be something the Buyer had control.
Typically, the title company holds the earnest money and they will not make the determination as to who is entitled to the earnest money. This has to be decided and agreed upon by both the Buyer and the Seller. The title company will require some type of document signed by both parties directing the title company to issue a check for the earnest money and to who. In some instances, Buyer and Seller may have decided to split the earnest money returned.
What about the situation where a Seller is refusing to agree and sign an earnest money release to the Buyer. In these instances, the title company will only hold the earnest money for 121 days and if not directed to issue a check to either party, the earnest money will be returned to the Buyer. Unless the Seller can show some type of court document where the dispute was decided in a court of Law and the money is to remain with the Seller, the Seller will not receive the earnest money from the title company.
Buyers are protected when the money is held by a title company but may have to wait the 121 days to obtain money that is rightfully owed to them.