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Locked in a real estate battle over earnest money?

On Behalf of | Nov 13, 2021 | Real Estate Law

In Texas and throughout the country, home sales are on the rise. Purchasing a home can be an exciting yet stressful experience, especially if it’s a buyer’s first home purchase or complex issues arise before closing. In some cases, a buyer may back out of a deal after an offer and giving earnest money to be held in escrow. Whether a seller must return earnest money to a buyer if the deal goes south depends on various factors; it is an issue that often sparks real estate disputes.  

What is earnest money? 

Making an offer does not necessarily lock a potential buyer into a deal to purchase a home. A buyer can show that he or she is serious about an offer by placing earnest money in escrow. The thinking is that a buyer is less likely to back out when he or she has already invested funds. At the time of closing, earnest money can typically be used toward closing costs or a downpayment on the home.  

If a home fails inspection or something else happens wherein a buyer is legally able to walk away without purchasing the home even after an offer has been accepted, a seller is obligated in certain circumstances to return a portion or all of a buyer’s earnest money. However, there are also certain circumstances in which a seller would not be obligated to do so. It depends on the terms of the sales agreement, which is why it is so important for a potential buyer (or seller) to make sure that he or she clearly understands the terms before signing.  

Resolving a real estate dispute can be stressful 

It is possible that a seller might refuse to return a buyer’s earnest money if the buyer decides not to go to closing after the seller accepted the offer. If a buyer believes that he or she is entitled to a return of earnest money funds, there may be grounds to pursue legal action in court. It is helpful to speak with a real estate law attorney ahead of time in order to seek clarification of state laws and determine what options are available for resolving a specific real estate dispute.