Tip:
Highlight text to annotate it
X
You’re selling your house and you’re concerned about what happens to the earnest money if
the sale falls apart and doesn’t close. I’m Tom Oldfield. I’m a real estate attorney
in Fircrest, Washington and I’d like to answer that question. First of all, the earnest
money is the money the deposit that’s put up by the purchaser to show good faith, to
seal the deal, and to compensate you as the seller in case the transaction doesn’t close.
If the transaction doesn’t close, the purchase and sale agreement is going to govern how
that’s handled. There are two clauses that are a choice that you will make when you sign
the purchase and sale agreement that you should consider. One of those clauses allows only
the forfeiture of the earnest money. The earnest money is all you get. The other clause allows
you to forfeit the earnest money and also pursue damages. If you think that there’s
going to be some change to the property before closing or something that’s going to cost
money that’s more than the earnest money, you want to be sure that you preserve that
other remedy. That you can pursue other remedies. The amount of the earnest money should be
enough to protect you in the event the sale doesn’t close, to compensate you for the
lack of use in the house, for any repairs that you’re going to have to do for surveys
that you may have to pay for, anything like that. How it’s going to be handled is going
to be determined by the document and if the sale fails, one or the other of the parties
– probably you – is going to make a demand for that earnest money to be paid out to you.
If the other party doesn’t agree, the escrow agent or the person holding the earnest money
doesn’t have the authority to decide who gets it. What they’re likely to do is start
what’s called an “interpleader action” where they deposit the money into court and
essentially say “You two go fight. I’m out of it.” That puts you into a lawsuit
which is going to cost more money. So if you have a difficult purchaser, if you anticipate
there may be problems in the sale, the sale may not close and you’re going to have trouble
getting your earnest money, you may want to increase the amount of earnest money so that
you get compensated for that. When you have questions on this, what I want you to do is
call the number on the screen below. I’d be happy to answer those questions and I look
forward to you calling. Thank you for watching this video. I’m Tom Oldfield.