What is earnest money and how does earnest money work?
Earnest money is a deposit made by a buyer to demonstrate their good faith in a real estate purchase agreement.
The earnest money is typically held in an escrow account managed by the seller’s or buyer’s real estate agent in California or an attorney in several other states, until the deal closes.
If the deal goes through, the earnest money is usually applied towards the purchase price.
What is earnest money, and how does earnest money work?
Earnest money is a deposit made by a buyer to demonstrate their good faith in a real estate purchase agreement.
The earnest money is typically held in an escrow account managed by the seller’s or buyer’s real estate agent in California or an attorney in several other states, until the deal closes.
If the deal goes through, the earnest money is usually applied towards the purchase price.
If the contract is terminated due to a breach of the agreement, then the earnest money may be returned to the buyer, forfeited to the seller or be the subject of negotiation.
In California, it is customary for the buyer to make a deposit when signing a purchase agreement.
The deposit acts as a way of showing good faith in the transaction and is generally held in trust by a third party, such as escrow.
The deposit holds both parties accountable in the transaction and can be refunded to the buyer if any of the contingencies of the contract are not met. It is also used to offset the closing costs at the end of the transaction.
What if a seller back out, can a buyer sue the seller for breach?
Yes, you can sue the seller for breach of contract if they back out after you have put down a deposit.
However, the practicality of such an endeavor will depend on many factors, and it is best to first consult with an attorney who specializes in real estate law.
Is a buyer entitled to the full deposit plus additional damages, if the seller breaches the contract?
Yes, you can sue the seller for the full amount of your deposit.
In some cases, the court may award you additional damages, such as attorney’s fees and court costs.
You should consult with an attorney in your area to discuss your legal options.
Is the seller entitle to the full deposit if the buyer back out of the transaction?
No, the seller is not entitled to the full deposit if the buyer backs out of the transaction.
Generally, a deposit is held in escrow until the transaction is completed.
If the transaction does not close due to a breach of contract by either party, the deposit will be refunded according to the terms of the contract.
What if the buyer and seller do not agree on who get the deposit or what part of the deposit?
If the buyer and seller do not agree on who should get the deposit or what part of the deposit, they will need to go through mediation or litigation in order to resolve the dispute.
Why mediate over going to court?
Mediation is a process in which two parties meet with a neutral third party to discuss and try to resolve their dispute without having to go to court.
Mediation offers many potential advantages over going to court, including the ability to save time and money, reduce stress, respect confidentiality, and maintain control over the outcome of the dispute.
Call or text (909) 226-3551 to set an appointment or to ask a real estate question
What if you do not agree with the decision of the mediator?
If you do not agree with the decision of the mediator, you can file an appeal to a court or to a higher authority.
The appeal should provide persuasive and compelling evidence that the mediator’s decision was incorrect or unjust.
Steve Olmos
Selling real estate in Southern California since 1980
Real Estate is my business and our clients keep us in business by using our services
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