Earnest Money Battles

When buyers make earnest money deposits but must terminate the contract because they cannot secure financing, they may find it difficult to recoup those funds if the seller violates the terms of the agreement and refuses to acknowledge contract termination. In such a situation, buyers can do little besides take the seller to court. However, Realtors can offer some alternatives to avoid this risk, such as putting up no earnest money or putting up earnest money in stages. Buyers also could request “sue or shut up” clauses, which require the escrow agent to refund the earnest money unless the seller files a lawsuit to hold the money back, or “loser pays” clauses, which require the breaching party to pay the nonbreaching party’s attorney’s fees. Other alternatives include having the buyer’s agent hold the earnest money instead of the listing broker. | Read More